Struggle for small business hubs still on

The book titled "Small is beautiful" signifies the strength of small ventures in a world driven by an ethos of "bigger is better". But these small businesses have lost their beauty in the Covid-19 pandemic. Be it a shoemaker at Bhairab or a small apparel maker in Keraniganj or a weaver at Sirajganj – the struggle for coming back to business is equally tough for all.

A fifth of small entrepreneurs in these local industrial hubs that cater to retailers all over the country are already out of business. The rest are in desperate need for money to repay debts and rerun the business.  

Azmal Hossain is a vivid example of how the pandemic has turned many small and medium entrepreneurs' lives upside down in no time.

A shoe entrepreneur in Kishoreganj's business town Bhairab, Azmal now drives an easybike to make a living.

Starting 10 years ago, his small footwear factory and shop with 10 workers had been running with all guns blazing before the pandemic played spoilsports – he eventually shuttered his business with a heavy burden of loans that he borrowed to pay staffers' salaries, shop rents and make ends meet with Covid-led closures in place over the last one and half years.    

The pandemic has now eased down with many local market manufacturers having rebooted their operations.

But Azmal, already riddled with huge financial stress, has not been able to return to business as he does not know how to manage capital.

"I want to resume my business but I have no way to arrange the necessary capital," Azmal told The Business Standard.

Like Azmal, at least 20% of footwear entrepreneurs have been left out of their businesses after having lost their capitals because of pandemic shocks.

The shoe makers who have come back to production are not having a good time either because of low customer footfall. Their sales are still going at 30% lower than what they had in pre-pandemic times.

Md Roman Mia, a shoe maker in Bhairab Bazar, said, "Our daily sales have now dropped to Tk6-7 lakh from 10-12 lakh."

There are 50,000 shoe makers in Bhairab, of them, 10,000-15,000 are yet to resume their businesses because of capital shortage, he also said, adding that those who reopened are not getting work orders as they used to get before because of a fall in the number of retailers across the country amid a low consumer demand.  

The same lean state has been prevailing in other domestic market manufacturing hotspots such as Keraniganj's apparel hub; batik and Jamdani weaving factories in Narayanganj and Narsingdi and handloom factories in Sirajganj, Pabna, and Tangail.

The production hubs meant for the local market are now grappling with low sales as consumers with pandemic-led income erosion are still not feeling confident to loosen the purse strings but for essential items. 

The fresh spike in prices of daily essentials has made it even more difficult for limited-income people to maintain their livelihoods, making them go for even more austerity. 

Experts say a portion of local market small manufacturers could not make a comeback because of a poor recovery in spending by limited-income people.

Ahsan H Mansur, executive director at the Policy Research Institute, told TBS, "People are still now not buying anything without necessity as they are yet to come out of pandemic-triggered income shocks. Their reduced purchasing capacity has hit the business hubs that mainly rely on spending of low- and middle-income people."  

Big businesses have made a turnaround from pandemic-led earning losses, especially on the back of the recovery in spending by well-off people, he also said, adding that exports have registered positive growth after a prolonged downtrend causing the overall economy to normalise.

Dr Hossain Zillur Rahman, executive chairman of Power and Participation Research Centre, told TBS that spiralling inflation has now got in the way of the recovery of small and medium businesses that meet domestic demand.

Both local producers and their main buyers belong to lower and middle classes. As a result, they are struggling to buy daily necessities. Production costs are going up too. And this is why local manufacturing hubs are struggling to turn their finances around.

Against this backdrop, many entrepreneurs of all business hubs, including Bhairab, Sirajganj, and Keraniganj, are now demanding capital support to restart their businesses. 

Besides, those who have somehow managed to get back to business also seek collateral-free loans from the government for continued sustainability.

Dr Hossain Zillur thinks that the government needs to declare a special financial assistance to protect them.

Many factories yet to return to production in Keraniganj

At least 40% of the factories in Keraniganj's apparel hub, which accounts for 70%-80% supplies of clothing items to local markets across the country, have not resumed production yet. Low- and middle-income people mainly buy dresses made in the hub.

Apparel businesses said limited-income people buy dresses mainly during Eid. At least 50% businesses lost capital as they missed out four Eid sales opportunities because of Covid-19.  Some have completely shut down after having exhausted all the money they had in paying showroom and factory rents, giving salaries to staffers, purchasing machinery and repaying bank loans during the series of lockdowns with zero income.

Nevertheless, they believe many of them will come back to business before the next Eid.

Muktar Dewan, owner of Golenur Garments, who sells his factory's jeans wholesale at Keraniganj Zilla Parishad Market, said in 2019, he sold around Tk4 crore worth of clothing items but not even Tk1 crore over the last years. He has kept his factory closed as he has stocks of unsold products and he now does not have any capital either. 

"I'll restart production in my factory ahead of next Eid after taking out a loan," he added.

About 10,000 traders and more than 5,000 factory owners in Keraniganj have been going through a similar situation. At least 3.5 lakh people were employed at the factories. With many factories yet to return to production, many workers now remain unemployed.

Muslim Dhali, president of Keraniganj Garments Traders' Association, said many factories did not resume operations owing to capital crisis and a lack of demand for their wares.

"Usually, factories here get full momentum three months before Eid. Traders sell clothes amounting to Tk2,000-Tk2,500 crore ahead of every Eid. But they witnessed almost no sales during the last four Eid festivals and lost their capital," he added.

Not enough orders or production in Batik Village, Jamdani Palli

Some 30% of artisans at "Batik Village" in Narayganj's Araihazar upazila have not resumed production owing to capital shortage.

Those who have returned to businesses are facing low work orders because of low demand.

A weaver named Bacchu Mia said, "I lost my entire investment amounting to around Tk6 lakh in 2020. In August this year, I took Tk2 lakh in loan and restarted my business, but my sales are yet to reach pre-pandemic level."

Meanwhile, yarn prices have increased by 20%-25%, but prices of dresses have not. They have reopened only for survival, he added. 

Some 8,000-10,000 entrepreneurs in Araihazar are going through the same problems. They have returned to business to recover lost capital, but they are facing a work order crisis.

Handloom weavers still in crisis too

Pabna and Sirajganj have the highest number of artisans making handmade garments. Of them, 3.5 lakh weavers in Enayetpur, Belkuchi, Shahjadpur, Ullapara, Kamarkhand, Kazipur and Sadar upazilas of Sirajganj mainly make sari, lungi, and towels.

Besides, over three lakh people in Tangail's Kalihati are engaged in the same profession.

Weavers said they usually invest from Tk10,000 to Tk10 lakh in making handloom items, but many of them have now remained out of business because of a hike in yarn prices.

Some of the artisans have changed their profession after having remained unemployed for along time. As a result, there is a crisis of artisans too, they added.

Fazlur Rahman Talukder, president of Bangladesh Handloom and Powerloom Owners' Association, said, "High yarn price is another big obstacle to our handloom business alongside the pandemic."

At least 25%-30% of the weavers are still out of work because of hikes in all costs, from production to transportation to labour, he added.