How Ramadan makes the economy stronger

Abdul Barek Mollah, from the Madhabdi of Narsingdi, has been engaged in the saree, three-piece and punjabi business for over two decades. He owns a small batik factory in his hometown that employs 30 people. 

Although the factory produces goods year-round, its sales peak during the month of Ramadan. "Our annual sale is around Tk15 crore, [and] 70% of it is done in the two months before Eid-ul-Fitr," he told The Business Standard.

"We buy all the raw materials for the factory with the help of bank loans. Businessmen from different places in the country come to buy dresses from us a month before Ramadan. The wholesale trading lasts till the 20th-22nd [day of] Ramadan. We also sell retail products at our shop before Eid," he added.

Most owners of nearly 500 batik factories in Madabbdi deem the Eid-ul-Fitr as "a blessing" with 65%-70% of sales of the Tk3,000 crore industry here stemming from Ramadan.

According to economists, sales of fashion and consumer goods experience a significant surge during Ramadan, injecting a fresh boost into the country's economy. And this surge reaches far and wide covering the markets for iftar products, entertainment, the zakat economy, tourism and transportation sectors.

The economists explained this surge as a result of the overall growth of the country's economy which, in effect, contributed to an increase in people's purchasing power. And so a Ramadan-centric economy budded.

In recent times, people tend to spend more during Ramadan and Eid, and the transactions surrounding these festivals have now reached several lakh crores in taka, including bonuses, salaries and remittances.

Dr Khondaker Golam Moazzem, research director at the Center for Policy Dialogue (CPD), said, "An increase in income has diversified people's demand. Earlier, Eid shopping was limited to food and clothes, but now, electronics and other luxury products are also bought on this occasion. So it comes as a blessing for the economy."

A massive Eid economy

A skyrocketed demand for different products during this period means companies increase their production. Many people spend their savings to cover the additional expenses. Consequently, bank deposits go down, and cash in people's pockets goes up.

Businessmen speculate that the size of the Ramadan and Eid-ul-Fitr economy in the country is around Tk3 lakh-Tk3.5 lakh crore.

A 2017 study by the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) estimated the economy at Tk2.5 lakh crore.

FBCCI President Md Jashim Uddin thinks that the economic transaction centring Ramadan and Eid-ul-Fitr has exceeded the threshold of Tk3 lakh crore now.

"The majority of transactions during Ramadan centre on consumer goods, including iftar, fashion products, zakat, donations to religious institutions, and more," he said. "However, there is currently a concern due to inflation."

Tk17,000 crore iftar market

The Café De Taj at the Mogbazar intersection in the city starts selling various iftar items including pyazi, beguni, chhola, various kebabs, halim, biriani etc from the first day of Ramadan.

Abdur Rahim, manager of the restaurant, said that they sell these products worth at least Tk50,000 starting from 2 pm till iftar time.

He said at least 20 more makeshift stores sell iftar items including Café Tamanna, Hotel Ghorowa, Bharta-Bhat Restaurant, and Bhai-Bhai Restaurant in the area.

Imran Ahmed, general secretary of the Bangladesh Restaurant Traders Association, said besides 450,000 permanent restaurants, at least 200,000 temporary selling spots of 'iftar items' emerge during Ramadan in the country.

In addition to ordinary restaurants, star-rated hotels and convention centres of varying quality across the country also become busy with iftar parties this month. Additionally,  the corporates, social, political and professional organisations host iftar parties.

Although there is not enough survey or research on the economic value of iftar in the country, we can gauge an estimate by combining the current inflation and people's demographic and expenditure patterns in the country. 

Currently, the population of the country is around 17 crore and around 88% of them are Muslims. During the month of Ramadan, at least 12 crore people break fast during iftar. If a person spends an average of Tk50, the daily expenditure would be Tk600 crore. It amounts to at least Tk17,400 crore in a month.

Mamun Rashid, the managing partner of PwC Bangladesh, conducted a survey on the iftar economy in 2014. He said, "The spending abilities for iftar of people in villages, towns and cities are different. But the per capita expenditure is not less than Tk50. Apart from this, if the expenditures in iftar parties are added, it will add several thousand crores of taka more."

Other consumer goods

Traders of other consumer goods and daily essential food products also have special preparations centred around Ramadan and Eid-ul-Fitr.

The demand for some products such as chickpeas, sugar, onions, soybean oil etc skyrockets. Additionally, the demand for other products including semai, fish, meat and milk also sees an uptick. 

An official from a top consumer goods producing company said that there is a demand for around 70 lakh kilogram of semai during Eid-ul-Fitr.

Customs officials said the demand for these products increase by at least 20% during Ramadan compared to the rest of the year.

Tk70,000 crore local clothes market

Both sides of the Buriganga river pass a busy time as the largest wholesale markets for readymade garments in the country are located in Keraniganj, Kaliganj and Sadarghat areas.

At least 40,000 shops in these areas meet the local demand for these products and retail traders across the country procure their products from here.

At least 10,000 wholesale traders are involved in this business in different markets including the Zila Parishad Market on the other side of the river. A store in this area with a size of 70-80 square feet has products worth several crores of taka.

People concerned said around 7-8 lakh people are employed in this business here.

Muktar Dewan, the owner of Golenoor Garments, is a wholesale trader of jeans pants at Zilla Parishad Market. He sold products worth Tk5 crore last Ramadan and this year his sales target is around Tk7 crore. "The sales in the one month of Ramadan is more than double than that of the remaining 11 months of the year," he told TBS.

The situation is the same in Keraniganj, Kaliganj or the Shanir Akhra area beside the Buriganga River.

According to Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association (BTMA), the organisation of textile mill owners who supply clothes to the domestic market, the clothing market in the country is around Tk70,000 crore and around 70% of the amount is sold during the Eid-ul-Fitr.

The main markets for three-piece, saree, lungi, punjabi, school dress, shirts, pants etc are centred on the two banks of the Buriganga, Madhabdi, Baburhat of Narsingdi, Islampur of the capital, Narayanganj, Pabna, Sirajganj and Kushtia.

Beyond clothes

In addition to clothes, the business of shoes, cosmetics, fashion items, crockeries, home appliances, etc also sees a boost during Ramadan.

Md Sirajul Islam, president of Bangladesh Footwear Manufacturers Association, said 60% of the sales of the country's Tk30,000 crore shoe market occur during this month.

He said that there are at least 25,000 shoe factories across the country.

The country's main shoe brand Bata Shoes sells products worth more than Tk1,000 crore annually. Sabbir Rahman, showroom manager of the company at the Bashundhara Shopping Mall, said, "Our sales during Ramadan are double compared to the remaining months of the year."

A senior official of Aarong, a leading fashion brand in the country, said products worth at least Tk5,000 crore are sold during Eid, which is around 60% of the entire year's sales.

According to Bangladesh Jewelers Association (BAJUS), jewellery products worth Tk200 crore will be traded during this month.

Tk50,000 crore zakat economy

Being a predominantly Muslim country, a large amount of zakat is applicable to the rich people in the country during Ramadan.

Kabir Hassan, professor of finance at the University of New Orleans, claimed in a study that the zakat economy in the country is more than Tk30,000 crore, although only a few crores of zakat are collected under the government's management.

However, recently the World Bank published a report on the potential economy of zakat in 10 predominantly Muslim countries. The report, titled 'Islamic Finance: A Catalyst for Shared Prosperity?' estimated the contribution of zakat to the GDP in 10 countries.

As per the report, the economic potential of zakat in Bangladesh is very high among other Muslim countries, which amounts to 1.63% of GDP. This rate is the second highest among Muslim countries in the world.

According to the finance ministry, the size of the country's GDP was Tk41 lakh crore in 2021-22 FY. In that respect, the potential amount of the zakat economy is more than Tk50,000 crore. Although only Tk7 crore was deposited in the government's zakat fund in the last financial year.

Muhammad Harunur Rashid, director of the Zakat Board run by the Islamic Foundation, said, "People of the country give zakat only to their acquaintances. The official initiative to collect zakat is not so strong. As a result, the major part of this sector still remains informal."

Religious institutions

A large part of the money required to run religious institutions in the country comes during the month of Ramadan. These activities involve promoting religious education, rehabilitation of orphans, financial support for religious scholars, and sales of Islamic books.

Experts believe that at least Tk1,000 crore is transacted in this sector during Ramadan.

Tk10,000 crore in the transport sector

From the beginning of Ramadan, people start travelling from cities to their villages to celebrate the Eid vacation. Around 1.7 crore people from Dhaka and approximately 1 crore people from Chattogram travel to their villages during this time. As people's mobility increases, the transport sector's business also experiences a surge.

According to the Jatri Kalyan Samity, the transport sector performs around 60 crore trips during Ramadan and Eid-ul-Fitr. Out of this, 40 crore trips are made by road, 20 crore by rail, sea and air. 

As per the organisation, at least Tk10,000 crore is transacted additionally in these trips.

Other sectors

Around 21 lakh government officials and employees get a possible Eid bonus worth Tk15,000 crore, and 85 lakh shop employees get around Tk1,000 crore. Besides, the potential bonus of 40 lakh RMG workers is around Tk5,000 crore, according to sector insiders.

Apart from this, expatriates from different countries send a large amount of foreign currency to their relatives during Eid to cover the extra expenses. This sector adds about Tk5,000 crore to the Ramadan and Eid economy.

Mohammad Helaluddin, director of FBCCI, said that more than Tk3 lakh crore is added to the Eid market in these other sectors.

Meanwhile, the wedding season in the country takes place after Eid which also increases economic activities.