SMEs struggle to navigate political turbulence

Struggling to rebound from the pandemic shock, small and medium enterprises (SMEs) are now entangled in the crossfire of persistent political unrest, compounding their challenges with a decline in sales. 

Despite various incentives and benefits, entrepreneurs said the sector was already grappling with challenges related to securing loans and surging raw material prices. 

Furthermore, the postponement of several fairs, including the highly anticipated annual SME Fair, has heightened concerns among entrepreneurs, who now fear a more significant loss than initially anticipated. 

The National SME Product Fair-2023, initially set for 5 November, has been postponed, impacting entrepreneurs nationwide. The fair serves as a platform for entrepreneurs from across the country to showcase and sell their products, as well as secure numerous orders. 

Masudur Rahman, chairperson of SME Foundation, told The Business Standard that the SME Foundation strategically opts for the winter season to host regional and national fairs, fostering the village economy. 

"However, concerns over security, stemming from the current instability, are discouraging a holding of these fairs by associations nationwide," he added. 

The fair will be held at the end of February next year, the SME Foundation chief said, highlighting the fact that entrepreneurs need swift production and sales cycles to sustain their business models, since accumulating inventories pose a significant burden. 

Slow sales and no fairs

Maksuda Khatun, the founder of Shabab Leather, reported a significant decline in product sales (60%-70%) due to the suspension of various fairs amid nationwide hartals and blockades, restricting consumer mobility. 

Expressing the urgent need for political stability to facilitate smooth business operations, Maksuda Khatun stated, "We want political stability so that we can conduct business seamlessly." 

Khatun let it be known that, anticipating sales at the SME Fair, she had prepared products worth Tk20-Tk25 lakh, but due to the fair's postponement, the funds are now stuck. 

With 40% of annual sales typically occurring from November to March, Khatun expressed her concerns, stating that in the last 15 days, she has had no sales in her showroom near the Hazaribagh factory.

SME Foundation Chairperson Masudur Rahman said political unrest is disrupting the supply chain nationwide, posing a significant threat to small and medium entrepreneurs who operate on limited capital and rely on a continuous product supply in the market. 

This disruption, accelerated in the aftermath of the Covid-19 pandemic and the Ukraine war, adds to the longstanding challenges faced by these entrepreneurs due to rising raw material prices, he said. 

"Efforts by the SME Foundation, the government, and entrepreneurs aim at mitigating these challenges, but the ongoing strikes and blockades further expose these businesses to risk," he added.

Md Mustafa Kamal, the entrepreneur behind Safe Trading specialising in food and agricultural processed products, said the business faces financial strains as raw material prices, such as sugar, flour, and oil, have nearly doubled in the last two years. 

Kamal said his monthly sales have declined by 60%-70%, down from the usual Tk50 lakh, and sustained a loss of approximately Tk80 lakh in two years. 

"With 35 employees to support and a monthly bank loan repayment of Tk3.75 lakh, the business is now at risk of bankruptcy," Kamal lamented.

SMEs in Bangladesh

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

In a study, conducted in 2013, 177 clusters were identified across the country, with a workforce of about 2 million. 

The annual turnover of 70,000 businesses in these clusters is about Tk30,000 crore, according to the SME Foundation. The SME Fair is one of the means of selling and promoting the products of these entrepreneurs.