21pc MSMEs close down amid outbreak

Staff Correspondent | Published at 12:47am on October 21, 2020

Twenty-one per cent of the country’s micro, small and medium entrepreneurs has temporarily shut their business due to the coronavirus outbreak, according to IFC survey findings released on Tuesday.

The report also showed that the country had the third highest, 64 per cent, of its MSMEs partly open or temporarily closed in South Asia after Sri Lanka and Nepal.

In terms of keeping firms open, state of Bangladesh was poor considering the performance of similar economies — Indonesia and Vietnam.

In Bangladesh, 36 per cent of the country’s MSMEs was open while the rate was 87 per cent in Indonesia and 82 per cent in Vietnam.

The survey report titled ‘Business Pulse Survey: Impact of COVID-19 on MSMEs in Bangladesh’ was launched at a virtual programme on the day. Bangladesh Bank governor Fazle Kabir attended it as chief guest.

IFC senior operations officer Ananya Wahid Kader presented the report at the event where IFC country manager (Bangladesh, Bhutan and Nepal) Wendy Werner, World Bank country director (Bangladesh and Bhutan) Mercy Miyang Tembon, BB executive director Abu Farah Md Naser and finance ministry additional secretary Arijit Chowdhury, among others, attended.

The survey conducted in June 4-15 based on responses from 500 MSMEs also showed that the lockdown had further repercussions as 94 per cent of firms reported declining sales figures while the same figures for women-owned MSMEs stood at 95 per cent.

In terms of value, around 52 per cent of the MSMEs observed decline in recent times against their sales value in the same period last year with fashion and clothing witnessing the worst 65 per cent decline.

In terms of likely exposure of workers, the survey found that 70 per cent of workers was in a vulnerable position as they were employed in businesses that were either temporarily closed or were partially open.

Considering the repaying existing loans, only 24 per cent of firms reported that they would be able to continue to pay out their monthly instalments on a regular basis while the rest 76 per cent of the firms lost their capacity to repay loans.

In the context of credit and access to finance, the firms were in financial distress as 83 per cent made losses during the 30-day period prior to the survey.

Almost half of the firms reported that they did not have sufficient liquidity to sustain operations for the next three months with small and medium firms faring slightly better than micro firms.

In addition, the firms unanimously reported that they were not comfortable with making credit repayments at the interest rates at which they received the loans and that it would be preferable if the rates of interest could be subsidised to 5 per cent.

The survey showed that more than 80 per cent of firms had not used or increased use of digital platforms in their business in response to the COVID-19 outbreak, reflecting the importance of focusing on financial inclusion.

Of the firms that had not received any government stimulus, 61 per cent reported that they were not aware of the policy measures implemented by the government.

 Fazle Kabir said that the government had taken 20 different stimulus packages to support different sectors including the MSMEs. Despite that supports, impact of coronavirus outbreak on the employment was one of the largest among the regional countries, he said, adding that the central bank would revise the focus of CMSME package by allocating 30 per cent of its fund to trading sector and the rest 70 per cent to the manufacturing and service sector firms.

To expedite the process, the BB is monitoring the total process and taking measures promptly, he said.

Speaking about the lack of awareness among the entities, the BB governor said that the implementation not only depended on the financial institutions but the awareness among the businesses was also vital.

British high commissioner Robert Chatterton Dickson said that the outbreak of coronavirus might affect the country’s transition from low-income country to developing one.

At the discussion, he placed four suggestions, including revision of oil price, tax base, enhanced use of the capital market and green financing.