In order to recover from the crises in the wake of Covid-19, businesses identified cash transfer, access to new credit and loans with subsidized interest rates as the three most needed forms of policy support
Though 63% entrepreneurs in Micro, Small and Medium Enterprises (MSMEs) in Bangladesh identified long-term financial support as the preferred means to get over the adverse impacts of Covid-19, only 0.4% of them received the stimulus packages declared by the government, according to a study.
The study finds that about 76% of the firms were not aware about the packages, while the remaining 24% failed to avail themselves of any support due to lack of awareness, eligibility, difficult application procedure and some other factors.
The International Finance Corporation (IFC) and the World Bank, in partnership with the UK's Foreign, Commonwealth and Development Office (FCDO), carried out the survey titled "Covid-19 Business Pulse Survey: Impact of Covid-19 on MSMEs in Bangladesh" between June and August this year and published the findings of the study at a webinar on Tuesday.
IFC Senior Operation Officer, Ananya Wahid Kader, presented the keynote address at the event.
In her address, she said that about 37% of MSME workers in Bangladesh had lost their jobs, either temporarily or permanently, within a span of one month, while 94% had experienced a sharp drop in sales due to the impact of Covid-19.
The survey of over 500 MSMEs shows that 70% of all workers are now in engaged in vulnerable jobs, with businesses either temporarily closed or only partially open.
About 91% of businesses in Bangladesh suffered the worst decline in cash flow, compared with those in similar economies, such as Vietnam 66% and Indonesia 69%.
The survey shows that most businesses are likely to experience a negative impact on sales and jobs over the next six months. 70% percent of micro-firms are not optimistic about their future sales prospects.
About 88% of firms had observed a decrease in demand for their products and services in the last 30 days, while 78% had been impacted by the supply of inputs, according to the study.
Some 86% of firms had witnessed a lower demand of products and insufficient supply of inputs leading to reduced work hours per week in the last 30 days.
About 94% of firms received a lower revenue compared to the previous month, and when compared to other countries in the region, Covid-19 has had its worst impact in Bangladesh in this indicator.
About 92% firms in Sri-Lanka, 88% in Afghanistan and 86% MSMEs in India had received a lower revenue during the Covid-19 period.
The overall amount of revenue dropped by 52% in Bangladesh due to the pandemic, and the country was placed second following Afghanistan with 61% revenue drop.
Due to lower production and reduction in sales, 83% firms in Bangladesh are incurring losses, which reduced their financial strength.
The report said that on average, businesses had only enough cash to cover costs for just over 110 days.
It said one in every three MSMEs is not able to pay loan installments due to decreased capacity. About 43% firms are not able to repay their loans regularly.
As per the survey, 37% of women-owned firms had temporarily shut down operations, compared with 21% owned by men.
About 80% MSMEs have no adjustment initiatives to adapt to the Covid-19 crises, while 9% started using digital platforms to cope with the crises. Only about 5% firms have invested in new equipment, software or digital solutions.
In order to recover from this crisis, businesses identified cash transfers, access to new credit and loans with subsidised interest rates as the three most needed forms of policy suppor.
Bangladesh Bank (BB) Governor, Fazle Kabir, said: "We are working hard to bring the economy back to normal."
He added that during the pandemic period, no small or medium enterprises have entirely shut down. This bears the testimony of the capability of the country's economy.
To overcome the loss in MSME sector, the government has formulated an incentive package of Tk20,000 crore, of which Tk10,000 are being refinanced to the banks, he said. He also added that a credit guarantee scheme of Tk2,000 had been taken up.
Taking part in the webinar, British High Commissioner to Dhaka, Robert Chatterton Dickson, said the MSME sector in Bangladesh will turn around again through successful implementation of the incentive packages.
BB Executive Director, Abu Farah Md Naser, said: "We are urging banks to disburse loans under the incentive packages in various ways."
"We hope that better progress will be made in loan disbursement in the weeks to come," he added.
Arijit Chowdhury, additional secretary, Bank and Financial Institutions Division, Ministry of Finance, said SMEs play an important role in the country's GDP and in generating employment in the country, but 100% of its potential remains unrealised.
Steps are underway to increase the SMEs contribution to GDP from the current 25% to 32% within the next five years, he added.
At the webinar, World Bank Country Director for Bangladesh and Bhutan, Mercy Tembon, said MSMEs are the key drivers for Bangladesh's economy, which account for about 25% of the country's GDP, and which employs over 20 million people.
She added that the Covid-19 pandemic has affected small businesses and informal workers the most with losses in income and jobs. Going forward, it will be important for Bangladesh to support the recovery of micro, small-medium enterprises, especially women-owned businesses, and remove constraints to their access to credit.
In her address, IFC Country Manager for Bangladesh, Nepal and Bhutan, Wendy Werner, said MSMEs in Bangladesh were already in a precarious position as they were operating on slim margins even before the pandemic hit.