Small Businesses Left Alone Amid Pandemic

18 April 2021
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Small businesses, which are considered the lifeline of the economy, had hoped that the government would take care of them to help them stay afloat when it announced a countrywide lockdown and a gigantic stimulus package to protect the economy and the people from the coronavirus disease in March last year.

The pause in economic activity that lasted for two months to May brought a bitter experience for the micro and small businesses as most of them hardly managed any financial support from the stimulus funds as their capital depleted. They breathed a sigh of relief after the partial withdrawal of the restriction in June. Small entrepreneurs and businesses resumed operations by borrowing from their relatives, and other sources, as bankers were reluctant to extend the loans.

But the dreams of the small businesses to make a turnaround on their own faded away after the second wave hit the country, compelling the government to bring back strict restrictions on movement for a week from yesterday to keep the deadly flu at bay. The decision prompted hundreds of small traders in Dhaka, Chattogram and Rajshahi to take to the streets as they think that the move would repeat the consequences they had faced a year ago.

"I have taken to the streets as I felt cornered by incurring losses since the last lockdown," said Sayeed Akter Kajol, the owner of a ready made garments shop in the RDA Market in the Rajshahi city. He has invested around Tk 10 lakh targeting the shopping season ahead of Eid-ul-Fitr. He usually invests Tk 2 lakh per month.

"The month of Ramadan is our peak season. I incurred huge loss in Ramadan last year due to the lockdown," he said, adding that he is yet to recover the losses he incurred in April and May last year. Kajol said he had failed to manage any fund from the government stimulus funds. He went to banks for loans, but they asked him to come up with collateral. "I do not have enough property to manage bank loans," he said.

In Bangladesh, there are about 78 lakh micro, small, and medium enterprises (MSME). Most of them are micro and small traders. Altogether, SMEs contribute about 25 per cent to GDP. But the micro-businesses were left alone to manage their recovery although the government announced Tk 121,353 crores worth of stimulus packages, which is 4.3 per cent of the country's GDP.

The central bank declared a stimulus fund of Tk 20,000 crore for small and medium enterprises. But banks disbursed 65 per cent of the fund as of March 18, data from the central bank showed. The Bangladesh Bank initially asked banks to disburse the fund by August 2020. But it was later forced to extend the deadline twice due to the reluctance shown by lenders. It may extend the time again as banks failed to distribute the funds by last month, which was the last deadline.

Another stimulus package, which has been formed for the underprivileged and marginal businesses, also saw poor implementation.  Banks disbursed 52 per cent of the Tk 3,000 crore fund through microfinance institutions as of March.

"A good number of lenders give out loans to large borrowers, and they have little arrangement to disburse funds to micro and small enterprises," said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh. 

"So, it is difficult to resolve the problem overnight. Some of the lenders are also showing unwillingness to disburse loans to the SME sector given the high operating cost." He feared that the unrest among small traders might fuel further if the restriction on movement extends. "The government should have drawn up a good number of fiscal measures before declaring the latest restrictions," Mansur said.

The government has already hinted that the restriction may be stretched beyond the initial one week if the rise in infections does not come under control. The government has not taken any preparation to fulfil the needs of small traders during the unusual period, said Mansur, also a former official of the International Monetary Fund. The stimulus packages declared by the government are considered as monetary measures as the central bank now provides the maximum of stimulus funds."Immediate fiscal measures should be taken. If the government does not do so, both the pandemic and the unrest will expand," he said.

Roni Raj Hossain, the owner of a restaurant in Rajshahi city, said that he had invested around Tk 5 crore to set up and expand two restaurants and two schools in the last decade. "My businesses are now facing uncertainty. I have to pay instalments for bank loans, salaries to employees, and other bills every month," he said. "I feel like I have committed a sin becoming an entrepreneur. All of my decade-long efforts and investment are going to astray. Death is preferable than facing another lockdown."

The businessmen in Rajshahi town are agitating under the banner of "Babosayi Oikya Parishad", an alliance of 110 business bodies in the divisional city. Hundreds of small traders also staged a demonstration in the New Market area in Dhaka city protesting the restrictions.

HelalUddin, president of the Bangladesh Shop Owners' Association, said that the restrictions had come at a time when the shop owners had started to recover from their earlier losses that stemmed from the previous lockdown. "We want to keep the shop open by maintaining health protocols as we make most of our annual profits during Eid festivals," he said.

Countries in North America and Europe have recently provided cash supports to small traders such that they can pay salaries to employees during the lockdown. "But, taking such initiative is difficult for our government. Still, the government should try to embrace such measures to some extent so that the small traders don't face debacle," Mansur said.

Syed Mahbubur Rahman, managing director of Mutual Trust Bank, said banks were afraid whether they would be able to recover the funds that had been disbursed under the stimulus packages in the recent months. "Banks are now under pressure. It is difficult for them to implement new stimulus packages given the shape of their existing financial health," he said.

The government should expand the credit guarantee scheme from the current Tk 2,000 crore so that banks can lend to micro and small enterprises without hesitation. The government can give tax rebates and waiver on electricity bills under its fiscal measures, he added.   

Writers: AKM Zamir Uddin ,Sukanta Halder ,  Akanda Muhammad Jahid ,  Anwar Ali

The article was published on The Daily Star.