Financial instability is not good news for any business, even if they are not trading overseas, but small businesses feel the impact of currency instability most noticeably. Compared to larger businesses, small businesses often lack the back-up finances to enable them to manage through periods of decline.
This brief illustrates how currency fluctuations affect SMEs’ investment decisions and access to credit. This relationship is stronger especially with SMEs in the manufacturing sector that mainly use imported inputs.
Governments are urged to support alternative sources of cheap and accessible local currency loans for SMEs to ensure reliable flow of cheap credit to these enterprises.