COVID-19 adaptive strategy and SMEs’ access to finance

The recent outbreak of COVID-19 has had colossal repercussions for all economic agents including households, corporations, and governments worldwide. Each economic agent responded in their own way to mitigate or at least diminish the scale of that impact. Small and medium-sized enterprises (SMEs) also countered the COVID-19 pandemic to their highest capacity despite being more vulnerable to crises. Many SMEs experienced shutdowns or declared bankruptcy due to the ineptitude and lack of financial resources or effective strategic response to cope with this unprecedented shock. In this paper, we assess the impact of the COVID-19 pandemic coping strategies such as adjusting the process and product, shifting business activity online, and remote working arrangements on SMEs’ access to finance. Using the World Bank’s COVID-19 impact survey data collected between 2020 and mid-2021 from 42 countries, we find that better strategies adopted by SMEs increase their likelihood of getting new credit from government and commercial banks. The results remain robust to alternative test settings. Our findings offer significant and timely contributions to SMEs’ access to finance and to the practicing managers on adopting and adjusting strategies in response to crises or disruptions.