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SMEs suffer as economic woes linger

Jul 25, 2023

The government's various benefits and incentives for small businesses are yet to pull away entrepreneurs from the pandemic-induced devastation as they are now confronted with fresh challenges, one worse than the other.

The problem with the sale of manufactured goods has added to their existing woes of difficulty in getting loans and an increase in the price of raw materials due to the dollar crisis.

On top of that, due to the increase in the price of gas and electricity, the cost of manufacturing costs have also increased, but the entrepreneurs are not able to sell the products accordingly.

Shabab Leather founder Maksuda Khatun told The Business Standard that the Covid-19 pandemic dealt a huge blow to her business in 2020, from which she is yet to recover.

She said her products worth around Tk1 crore remain unsold.

Maksuda said the pandemic had halted her progress. "Many orders were cancelled. The factory was completely closed for two months, but we had to pay the workers' wages and the rent."

She began to see a glimmer of hope SME fairs resumed across the country and was able to sell some unsold goods.

Then, the Russia-Ukraine war dashed that hope.

"Since the start of the war, the price of raw materials has almost doubled, increasing our production costs," the entrepreneur lamented.

Hasina Mukta, owner of Natunatta Boutique and Handicrafts Fashion designer told TBS that it is difficult for her to keep her business afloat.

The wholesale price of yarn and clothes have increased, resulting in a bloated production cost, she said.

The war has increased the price of cotton by almost 40%, Mukta told TBS.

Small businesses like hers can turn around if the government provides raw materials for us at cheap prices and given the opportunity to sell our products abroad, she said.

"Now, we pay 9% interest for loans which should be at 4%-5%," she suggested.

According to the Registrar of Joint Stock Companies and Firms (RJSC), the number of company liquidations in the country has increased each year since the pandemic broke out worldwide in 2020, with 317 facing liquidation in the first nine months of the current fiscal year 2022-23.

The number was 301 in the entire past fiscal year.

The previous fiscal years had seen much smaller numbers of company liquidation – 173 in FY21, 93 in FY20, and 84 in FY19.

The companies that went into liquidation during the period were all small and medium enterprises and had a cumulative investment to the tune of Tk17,300 crore. Several foreign-owned companies also faced liquidation – a situation when firms shut down operations and seek to sell off assets.

There are about 78 lakh cottage, micro, small and medium industries in the country. About 2.1 crore manpower is directly and indirectly employed in the SME sector.

The SME Foundation says most of the backward linkage industries in the country are small and medium-sized.

The contribution of the industrial sector to the economy of Bangladesh is 37.07% while it is about 28% for the SME sector.

The government has formulated the SME policy, aiming to increase the contribution of the SME sector to 32% by 2024.

The SME Foundation says that the SME sector contributes 60% to 70% to the GDP of China, Japan, and South Korea. Bangladesh has a lot of potential to increase its contribution to GDP in this sector. And for this, it is necessary to give special facilities to SME entrepreneurs.

Md Masudur Rahman, chairperson of SME Foundation told TBS that entrepreneurs can sell products where there is demand in the domestic market.

"We are connecting entrepreneurs with markets and buyers. We have conducted SME fairs in every divisional city. We have agreements with major domestic and foreign online platforms to sell products online," he added.

Some products that are not imported due to some LC restrictions are now manufactured by domestic entrepreneurs, creating an opportunity, Masudur Rahman said.

"Various associations of entrepreneurs are holding fairs all over the country. We encourage them. Through this, SME products are increasing in popularity," he added.

SME / SME Sector / Small and Medium Enterprises (SMEs) / Bangladesh / In praise of the small

Rafiqul Islam & Jahir RayhanThe government's various benefits and incentives for small businesses are yet to pull away entrepreneurs from the pandemic-induced devastation as they are now confronted with fresh challenges, one worse than the other.