SME sector crumbles amid corona crisis

Sohel Hossain Patwary

27th June, 2020 10:32:06 printer

SME sector crumbles amid corona crisis

Entrepreneurs in small, medium and cottage sector have been hit hard by the disruption caused by the coronavirus pandemic, resulting in a steep fall in sales and affecting jobs and income.

Many SME entrepreneurs had to shut their operation while many are struggling to survive.

As the SMEs are hit by the pandemic, many entrepreneurs said they are facing difficulty in getting benefits from stimulus packages and loans from banks and financial institutions in the time of need.

They also said that the government needs to pay special attention to the SME sector and develop an emergency support system.

According to the Bangladesh Bureau of Statistics, there are 5.5 million SMEs with around 15 employees each and those SMEs make up 39 per cent of total organizations in the country.

World SME Forum said there are around 6 million small, medium and cottage industries in the country and Bangladesh ranks seventh in the world in terms of the size of the SME industry.

Entrepreneurs fear if the economic stalemate continues for months, half of the SMEs will have to shut down their operation and around 7 million jobs will be affected.

Many entrepreneurs said they are operating their business on a limited scale and many had to temporarily stop their business due to disruption in the supply chain, unavailability of raw materials and a drastic fall in sales.

Kazi Sajedur Rahman, chairman of KPC Industries, said he is operating his mills on a limited scale but the return has been very low though the fixed cost like salary, utility bills have remained the same.

“Most of the small and medium entrepreneurs do not have much savings as most of them are doing business with limited capital,” he said, adding that the sudden jolt has pushed them into a state of uncertainty.          

He also demanded better access to finance from the incentive package for the small entrepreneurs without any hassle.

Rashedul Karim, the owner of Creating BD, underscored the need for expanding the extent of the local market for survival and good policy move for the products made by the SMEs.

The government should bring innovative policy like discouraging import of products which are available locally and ensure a linkage between the supply chain and big industries, he said.

In a recent survey carried out by BUILD, around half of the SME enterprises had to stop their operation temporarily or permanently amid the COVID-19 crisis.

Due to the shutdown, most small businesses were at a standstill for more than three months, struggling to pay salaries to their staff and bear other related costs.

The situation is quite bad in rural areas. Steps Towards Development (STEPS) and the Gender and Development Alliance (GAD Alliance) cited in a recent report that around 80 per cent of rural women entrepreneurs have been forced to stop their small or cottage business during the pandemic.

In impact assessment conducted by Bangladesh Institute of Development Studies (BIDS) revealed that the SME sector’s annual revenue dropped by 67 per cent in 2020 compared to 2019.


Analysts suggest taking special plans for SMEs


Safiqul Islam, Managing Director of SME Foundation, said the ongoing crisis might cause workforce layoff in the SME sector which would cripple the growth of the economy.

Stressing the need for special attention, he said utilization of credit wholesaling program is much required now which can be ensured through proper access to the government stimulus package for the SMEs.

Dhaka Chamber of Commerce and Industry (DCCI) president Shams Mahmud said SMEs should get the same facilities which now RMG or non-RMG sectors are enjoying.

Terming the SMEs as a key driver of economy and major contributor to the GDP and employment, DCCI president said a new policy should be adopted only for the SME sector so that the sector can face the situation.

The ministry of industries has already taken initiatives to create a digital database for SME entrepreneurs.

At the same time, Bangladesh Small and Cottage Industries Corporation (BSCIC) has taken initiatives to establish an online marketplace to assist entrepreneurs in the Cottage, Micro, Small and Medium Enterprises (CMSMEs) for marketing their products.