The devastation caused by Cyclone Ditvah has once again exposed a recurring policy failure: the systematic neglect of MSMEs in post-disaster recovery frameworks, despite their central role in employment, local markets, and economic revival.
In the immediate aftermath of disasters, MSMEs face severe disruptions to local markets and supply chains, undermining operational continuity. Many rely on borrowed capital to sustain daily operations, and forced closures only deepen debt burdens, pushing enterprises closer to insolvency. Yet, despite their economic significance, MSMEs consistently struggle to access affordable recovery finance, whether through government relief mechanisms or commercial credit.
This widespread collapse of micro- and small enterprises often goes under-recognised, even though its long-term consequences, job losses, income erosion, and delayed regional recovery are profound. A fundamental problem lies in how MSMEs are positioned within disaster response policies. Assistance frameworks typically prioritise households and public infrastructure, while enterprises fall into a policy blind spot.
MSMEs are frequently deemed “not poor enough” to qualify for social protection schemes, yet lack the financial capacity to purchase commercial insurance. The diversity of enterprises ranging from informal micro traders to medium-scale manufacturers further complicates standardised assistance norms. As a result, many viable businesses collapse permanently after disasters, taking local livelihoods with them.
This neglect is economically short-sighted. When MSMEs recover, communities recover. These enterprises generate employment, stimulate local demand, restore supply chains, and rebuild confidence. In this sense, MSME resilience is a cornerstone of community resilience.
On the occasion of Micro, Small and Medium-sized Enterprises Day, a five-point agenda has emerged to address these structural vulnerabilities. First, policymakers must work with formal and informal MSME associations to develop simple risk self-assessment tools, covering both physical hazards and financial risks. These tools should help enterprises understand vulnerabilities not only to themselves, but to workers and dependent households.
Second, identified risks must be addressed through a graded toolkit of resilience solutions, linked to affordable financing mechanisms that allow MSMEs to invest progressively in protection and adaptation.
Third, there is an urgent need for locally appropriate risk-transfer solutions, including group-based and pooled insurance models, which can reduce premiums and expand coverage for small enterprises.
Fourth, disaster recovery finance systems must explicitly include MSMEs, using a balanced mix of grants and concessional loans rather than debt-heavy instruments that worsen insolvency risks.
Fifth, MSME owners must be given a formal role in local disaster risk reduction and recovery planning, ensuring that “building back better” translates into more resilient enterprises and diversified livelihood opportunities.
Across all these actions, digital innovation and new insurance models offer transformative potential. Digital payments, participatory risk mapping, and localized assessments can help integrate informal businesses into resilience frameworks before disasters strike. Parametric insurance schemes, which trigger payouts based on predefined thresholds such as storm intensity, offer faster, dispute-free compensation and have proven effective in reducing recovery delays.
Global initiatives such as the UNDER-supported ARISE Network, which has promoted MSME-led disaster risk reduction for over 15 years, demonstrate that resilient small businesses can be powerful agents of community recovery if policy frameworks allow them to be.
