LEGAL PERSPECTIVE: SMEs DURING COVID – 19 by Dr AbdelGadir Warsama, Legal Counsel, Bahrain

The spread of Coronavirus Pandemic brings many catastrophic issues to business. All are obliged to minimize movement, remote body contacts, gatherings in big numbers and other official instructions. Authorities took such measures to protect all Bahrain. No doubt, we need to comply to help protecting our community. However, business has been affected greatly, particularly small and medium enterprises (SMEs). This sector, irrespective of contributions to the national economy, employment sector and innovation, but suffered greatly.

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SMEs, in Bahrain, are mostly at embryonic stage and are still crawling with difficulty. Handicaps are available, including insufficiency of capital, lack of necessary experience and clear plans. Most of them are in dare need of inclusive support, to be able to sustain or even survive. Unfortunately, due to COVID – 19, the situation has become more difficult, if not impossible.

Difficulties may come unexpectedly with grave effects. However, certain people absorb any difficulty and even become stronger. We anticipate that, some of the SMEs, will face this time and mange to pass the exercise. However, we believe, there are certain issues that could play a pivotal role in sustainability of SMEs.

This includes, among others, wise careful spending of expenditure. All entities spend lot of money to cover office rent, salaries, utilities, and fees. This could be absorbed during normal days, however, due to COVID – 19, SMEs will face stringent circumstances to the extent that they may collapse if expenses are not cut to the maximum. Also, to keep liquidity at hand to fuel the movement. Here, there is a need for Government support and banks to avail liquidity. Another problem, faces SMEs, comes from loans and financial facilities given to SMEs, as meeting deadlines to pay loans installments, poses great risks. The risk here, endangers the net worth of SMEs as the capital could be depleted. Some companies, in response to such risk, go to terminating contracts of service of many employees, thus, exaggerating the difficulties. Herein there is a need for clear plans to rescue such entities.

Also, it would be important for SMEs, to keep in touch with concerned authorities and, in this respect, to be part of the “solutions” initiated by such authorities. Not to let others to speak on their behalf and propose unrealistic track. Actual presence will give better results to them and their community. In this, SMEs shall take initiatives that boost sustainability.

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