Fragility, conflict and violence (FCV) have become some of the most pressing threats to economic development. Over 2 billion people live in FCV countries, and it is expected that by 2030 nearly 50 to 60 percent of the world’s poorest people will live in areas affected by conflict. This can pose major socioeconomic challenges, including a reduction of gross domestic product growth by 2 percentage points per year and driving youth to join rebellions due to conflict-driven unemployment.
One way FCV countries work to reduce the risk of violence and help build resilience is by creating economic opportunities through jobs, which can decrease poverty, increase productivity and build social cohesion. In FCV countries, the responsibility for creating these critical jobs in the private sector falls on the shoulders of entrepreneurs of formal small and medium enterprises (SMEs), as well as SMEs in the informal sector.
However, working in a FCV context can have far-reaching consequences on the well-being and productivity of entrepreneurs. The unusually high demands and stress of operating in FCV-affected areas can result in mental health challenges such as depression and anxiety among SME entrepreneurs, according to a recently published World Bank Group (WBG) report. To address this, the report explores potentially scalable interventions, such as cognitive behavioral therapy (CBT) trainings that can be implemented in low-capacity contexts and measured for impact. CBT is based on the concept that our thoughts, feelings, physical sensations and actions are interconnected, and the way individuals perceive a situation is more closely connected to their reaction than the situation itself. CBT helps an individual identify unhelpful thought patterns to improve how they feel, and hence, behave.
Even in non-FCV environments stress can be problematic for entrepreneurs. Whereas low to moderate levels of stress can be a positive trigger for the performance of entrepreneurs, chronic stress is harmful for their mental well‐being and performance in the long run. Compared to large firms, SME owners and managers lack diversified capital, stable sources of income and/or delegation opportunities. This can leave them more prone to stress-driven depression, anxiety and other mental health conditions.
These entrepreneurial stressors are exacerbated in FCV environments. SME entrepreneurs routinely work with significantly higher levels of uncertainty and risk, so decisions can start to represent tough choices. Every difficult decision imposes a cognitive cost, sapping energy and attention, and depleting working memory. Over time, this can affect an entrepreneur’s productivity through reduced attention to detail, lower motivational capabilities, which then discourages employees through a mood contagion effect, and an increased tendency to display counterproductive work behavior(s) resulting in more angry outbursts.
One place where this can be seen is in Khyber Pakhtunkhwa (KP) and Federally Administered Tribal Areas (FATA) of Pakistan. Conflict over three decades has resulted in a significant decline in SME performance here, which now ranks among the poorest regions in the country. A recent rapid needs assessment of SME entrepreneurs in KP and FATA by the WBG, with the Human Development Research Foundation, found various adverse symptoms, such as “agitated mood, disturbances in diet and sleep, low self-esteem, nervousness, loss of interest and inability to concentrate on work.” These symptoms were directly attributable to conflict‐related stressors, such as “fears about the safety of their loved ones, as well as flashbacks and thoughts of traumatic experiences.”
While there is a dearth of systematic studies looking at the link between fragility and mental health outcomes for entrepreneurs, and even less on its impact on business outcomes, literature from cognitive psychology and public health shows that with the proper set of CBT interventions, significant positive changes can be observed in FCV environments.
In addition to our recent report, to add to this body of evidence and explore potential impacts on entrepreneurs, the WBG is conducting a small pilot study to measure whether CBT trainings can improve mental health and business outcomes among SME entrepreneurs in KP/FATA. Baseline data from the study shows that more than 35 percent of the randomized sample of 234 entrepreneurs qualify for clinical case levels of depression, confirming what we find in the literature. However, according to the baseline data, few people recognized these challenges as mental health problems that need specific management, even though a significant share report a derailment of their business results due to health outcomes.
The study results looking at the impact of CBT on mental health outcomes will be released next year, but early data points to both male and female entrepreneurs being unique at-risk groups. Entrepreneurs score high on “self-efficacy,” which indicates confidence in their ability to get things done, but this trait might also make them less likely to seek help. Cultural norms play a role too, making it less likely that both men and women will seek help. Whereas men are expected to be “strong and macho,” a lack of freedom and traditional social structures prevent women from accessing support. Since these interventions tend to be inexpensive, financial constraints do not appear to be a concern.
Even with these early results, there are two potential policy considerations that could help address these issues. First, the economic rehabilitation of a population exposed to a humanitarian crisis must include interventions to reduce mental health challenges and build resilience. This implies including mental health interventions as part of the basket of technical support provided to SMEs, which includes access to finance, infrastructure and technology extension services, and technical training. Second, we should consider expanding “occupational health” policies in FVC contexts to include at-risk job creators. This would encourage leaders and managers of job-creating firms who function in high levels of uncertainty to seek support, helping to decrease the negative impacts of the high stress experienced in FCV environments.
The articled is published courtesy of the World Bank Group