The UN General Assembly declared 27 June Micro-, Small and Medium-sized Enterprises (MSMEs) Day. This year, the theme is "MSME 2021: Key to an inclusive and sustainable recovery." An International Trade Centre survey in 136 countries says Covid-19 strongly affected nearly 62% of women-led small businesses, compared to just over half of firms led by men, and women-owned are 27% more likely not to survive the pandemic.
In Bangladesh, SMEs were the first to bear the brunt of pandemic-induced business disruptions, and they are struggling to recover. Formal and informal MSMEs make up over 90% of all firms and account, on average, for 70% of total employment and 50% of GDP. In Bangladesh, SMEs contribute 25% of GDP and employ about 24 million people. Entrepreneurs of cottage, small and medium businesses tell what they actually need and how much of their concerns are addressed as they speak to Abbas Uddin Noyon and Rafiqul Islam of The Business Standard.
Help SMEs sell products
Mirza Nurul Ghani Shovon
President, National Association of Small Cottage Industries of Bangladesh
Small and Medium Enterprises (SMEs) are struggling to survive. Small entrepreneurs are in crisis as they are unable to sell their products amid the pandemic. The government is providing low-interest financial support to overcome the crisis, but it is not enough.
In addition to providing financial support for the sustainable development of the SME industry, emphasis should be placed on non-financial activities such as developing SME product market, market linkage, capacity build-up, training, awareness, labor rights and health issues in the factories.
Adequate government support, tolerable VAT and policy are needed to take this sector forward. Special attention should also be given to women entrepreneurs.
Around 40-50% of the SME industry is still closed because of Covid-19. Besides, many small entrepreneurs are going through a bad situation as they cannot sell their products. The supply chain is severely damaged because of the pandemic and lockdown. So, not only access to finance support, but non-financial activities should be emphasised.
The government announced a Tk20,000 crore incentive package to offset the losses of the SME entrepreneurs. However, it is not being implemented properly. In this case, a number of financial institutions are negligent. The slow pace of implementation of the incentives programme is also due to the lack clarity of the SMEs' definition. The SMEs would have benefited more if the incentive programme had been implemented in a more organised way.
The package given to small and medium entrepreneurs through the SME Foundation is being implemented well. The entrepreneurs are getting loans, and benefiting from them. In this case, the amount of money needs to be increased.
The SME sector will move forward if the new entrepreneurs are encouraged and refinancing schemes are properly implemented and skills are developed in the non-financing sector.
We need competition act support
President, SME Owners Association of Bangladesh
Businesses and trades came to an almost grinding halt after the coronavirus outbreak in 2020. Small ventures were forced to shutter businesses though the big industries were running and in profit-making. Subsequently the small enterprises collapsed.
The government announced more than Tk1 lakh crore low-cost loans for industries to cushion the pandemic fallout. Almost cent percent of the stimulus for the large and export oriented garment industries has been disbursed. But banks have so far distributed only 26% of the loans meant for the small and medium industries. Measures should be taken so that the undisbursed stimulus packages reach out to the actual affected small entrepreneurs.
Due to the pandemic, the small businesses have been affected severely as the retail and wholesale trades got immensely disrupted. Moreover, the purchasing power of the people has declined abnormally. Consumer products, after manufacturing or import, follow a long supply chain to finally end up in customers' hands.
Trade Vat (value-added tax) at several supply chain slabs make the items pricier. Therefore, Vat should be repealed on the wholesales and retails at least for next two years.
Apart from the pandemic-led slump, many small enterprises shuttered after failing to survive the unequal competition while more ventures are going to follow the lead. Despite having the Competition Act-2012 in place, the market hardly sees any benefit of the legal structure.
Big industries are now also marketing plastic mugs and pots, bread, chanachur and jhalmuri. It needs to stop. Such manufacturing prompting uneven competition is banned in many countries such as neighbouring India.
Cut 20% duty on capital machinery
President, Association of Grassroots Women Entrepreneur Bangladesh
Small ventures manufacture products worth Tk40,000 crore. The SME sector makes more than 1 crore entrepreneurs self-reliant. But, the saddening thing is the sector people are now facing a terrible time.
No businesses in Bangladesh had to face the hardships that the SMEs had to go through in the post-pandemic situation. The SMEs sustained around Tk92,000 crore losses alone in the first two months of the virus outbreak in 2020.
Only 38% of the small and medium entrepreneurs had previously taken bank loans as the remaining 62% of the entrepreneurs never went to any bank for loans. Therefore, the government packages for SMEs failed to play a crucial role.
Recently the government came up with a Tk1,100 crore package involving several NGOs, the SME Foundation, Bscic, and some banks for disbursements.
But, the demand for loans from 60 to 70 small entrepreneurs' associations across the country is several times higher than the allocation. So, many entrepreneurs may not get the money despite having an appetite for a loan.
On the other hand, we asked for some fiscal support in the national budget for the 2021-22 fiscal year. But the proposed budget frustrated us.
For the development of the sector, we put forward 63 proposals while only 14 have been taken into account in the proposed budget. Therefore, the sector may get stuck in the near future.
For the small women entrepreneurs, we still demand a 20% cut in import duty on capital machinery considering the pandemic.
The tax-free turnover for women entrepreneurs needs to be increased from Tk70 lakh to Tk1 crore. At the same time, government support is needed to increase skills in digitisation, digital marketing, and to create a virtual marketplace.
Women in SMEs need fund support
Dr Nadia Binte Amin
Women Entrepreneurs' Network for Development Association (WEND)
In order to integrate women into the mainstream of development, there is no alternative to creating more and more woman entrepreneurs in the country.
Providing the overall support for smooth running and expansion of their businesses, WEND will work for the creation of new women entrepreneurs across the country, facilitating their overall development, empowerment and contribution to the country's economy.
The main focus of SME entrepreneurs is the festivals including Eid, Puja and Pahela Baishakh. Women entrepreneurs were doing good business, but they have been missing all the festivals for the last two years. They could not sell their products even after investing for several festivals. Some entrepreneurs moved towards online based marketing, but the grassroots entrepreneurs do not have the minimum concept and training required for this. As a result, 40% of SME entrepreneurs have dropped out. Among them, 49% are women entrepreneurs.
Besides their lacking in information technology, inability to move easily is another big problem for women entrepreneurs. It has become more evident during the ongoing pandemic. As a result, special arrangements are needed for women.
After policy and technical support, the most needed thing is capital. Almost all women entrepreneurs have lost capital due to corona.
The stimulus package was supposed to provide Tk5,000 crore for women entrepreneurs. But, the procedure was very difficult. The central bank eased the procedure following our repeated requests. However, many small entrepreneurs still are not being able to apply.
Most women entrepreneurs do not have a three-year trade license. It is possible for new entrepreneurs to fulfil the conditions of the credit line with the banks. It is also difficult for women entrepreneurs to find a guarantor.
It is very important to accept some of the demands of the entrepreneurs in this sector considering the employment of several lakh people. The demands are: making the tax-free income limit for women up to Tk4 lakh, tax exemption on sales up to Tk1 crore and VAT exemption at retail level on sales below Tk50 lakh.
Moreover, it is necessary to rehabilitate the women entrepreneurs affected by the pandemic providing cash assistance to them.
20% cash incentive essential for handicrafts exports
President, Bangladesh Handicrafts Manufactures and Exporters Association (Banglacraft)
Although our association has 500 members, at least 3 lakh entrepreneurs, big and small, are working in handicrafts manufacturing. This huge number of people are in trouble as the country's economy has come to a standstill during the Covid-19 pandemic.
Locally, the price of raw materials used in handicrafts has increased by up to 25%. Besides, the production cost has also increased due to the pandemic. The rising cost has made it difficult for the industry to survive. As a result, we are not able to compete with the foreign countries at present.
Loans at 4% interest rate from the Tk20,000 crore incentive package announced by the government for the SME sector is very difficult to get. In fact, almost none of the Banglacraft (Bangladesh Handicrafts Manufactures and Exporters Association) members have got any loan from the incentive package. I export goods worth Tk20 crore a year, but I did not get a Tk2 crore loan.
The conditions for getting this loan need to be relaxed further.
Along with facing problems at the local market, we have to compete with China and Vietnam, our main rivals, in exports the international market. The handicraft traders in those countries enjoy a very low or no interest rate for loans.
To develop the domestic industry, the entrepreneurs of this sector have to be given a loan of Tk2 lakh to Tk2 crore. The government can also give grants to 100-200 people from the incentive package. This will turn the sector around. The country will also benefit.
In the budget till 2018-19, there was 20% incentive on the handicrafts exports. Later this incentive was reduced to 10%. All in all, the survival of those involved in this industry has become a challenge.
Even in such a situation, the exports of this sector are on the rise in the current fiscal year compared to the previous one. At the end of the year, it could exceed $30 million. This could increase further in the coming fiscal year, if the traders can survive. In order to keep the traders alive, 20% incentive has to be brought back in the budget.