Stimulus eludes 83pc small businesses | The Daily Star
12:00 AM, June 25, 2021 / LAST MODIFIED: 08:13 AM, June 25, 2021

Stimulus eludes 83pc small businesses

BUILD-Policy Exchange survey finds, calls for tailored scheme

Eighty-three per cent of the cottage, micro, small and medium enterprises did not receive stimulus relief as it was not well-tailored and did not consider the challenges and needs of small entrepreneurs, a new survey found.

Of the respondents, 69 per cent reported that they were unable to pay wages to staff in 2020 due to the coronavirus pandemic, according to the rapid survey of the Business Initiative Leading Development (BUILD) and the Policy Exchange of Bangladesh.

The situation has not improved: 61 per cent of respondents think their revenue would fall in 2021.

The survey result was shared at a webinar styled "Covid Stimulus and Links to Employment, Consumption and Investment: The Bangladesh Experience, Global Lessons, and Priorities for Next Round Support".

The survey, carried out in February this year, was based on the interviews of 50 CMSMEs and top officials of private banks. The CMSMEs represented major industries, including leather and leather goods, trading, textiles, light engineering, packaging, and agriculture.

The sales of 86 per cent of the firms had been negatively impacted because of the pandemic, the survey found.

Ninety-five per cent of firms reported a depressed demand compared to the pre-Covid scenario, in an indication that consumption and demand have not recovered.

"All key growth drivers of Bangladesh were adversely impacted with the spread of Covid-19 where CMSMEs were impacted the most. Many of them didn't receive any government incentive," said M Masrur Reaz, founder and chairman of the Policy Exchange of Bangladesh, a private policy and strategy advisory platform.

"The design of the stimulus packages was not adequately inclusive because of a lack of consideration of the challenges and needs of small entrepreneurs."

Using data from the Bangladesh Institute of Development Studies, Reaz said the average revenue reduction for CMSMEs was 60 per cent in 2020. About half of them planned to lay off 50 per cent of staff to survive.

"So, they need a second stimulus package," he said.

The informal economy did not receive the expected benefit from the stimulus package, said Nihad Kabir, president of the Metropolitan Chamber of Commerce and Industry.

She focused on the upgradation and modernisation of the education system of Bangladesh.

The government will consider the demand of small businesses if a second stimulus package is formulated, said Planning Minister MA Mannan.

"Best practices from developed countries should be considered to make the overall economic ecosystem of Bangladesh vibrant," he said.

Social inclusive measures such as assisting youth and unemployed, accelerating vaccination programme, access to education, and mental health needed to be addressed and linked to the stimulus package, said Tuomo Poutiainen, country director of the International Labour Organisation.

The skill ecosystem needs to be upgraded to build a technically and technologically sound workforce to attract FDI to the economic zones, he said.

Employment generation should get the proper focus in incentive packages because the post-pandemic situation would not be the same, said Prof Mustafizur Rahman, a distinguished fellow of the Centre of Policy Dialogue.

The involvement of NGOs and associations in the disbursement process of the special package would yield a better outcome, he added.

The government has announced two stimulus packages for SMEs, but the disbursement process from commercial banks is not adequate. "So, many of them did not receive the benefits," said Md Masudur Rahman, chairperson of the SME Foundation.

As most of the SMEs are in the informal sector and have no formal documents, banks are not giving loans to them, he said. "So, a structural change is necessary to ensure access to finance for SMEs."

Chittagong Chamber of Commerce and Industry President Mahbubul Alam said the expected results could not be achieved through the first package.

Jamal Uddin, a general manager of Bangladesh Bank, said 73 per cent of the stimulus package for the CMSME sector had been disbursed, which benefited about one lakh entrepreneurs.

Md Jashim Uddin, president of the Federation of Bangladesh Chambers of Commerce and Industry, Rizwan Rahman, president of the Dhaka Chamber of Commerce and Industry, Abul Kasem Khan, chairperson of the BUILD, Asif Ibrahim, founder chairperson, and Ferdaus Ara Begum, CEO of the platform, also spoke.   

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