Stimulus package may elude SMEs

Small businesses in the informal sector are the prime movers of the economy and worst hit by the pandemic, but they are less likely to benefit from stimulus packages due to absence of a database and little access to banks.

Unemployment may rise and economic dynamism might be stymied unless the current situation of small and medium enterprises improves, business analysts have warned.

They voiced their concerns at an online dialogue yesterday as Business Initiative Leading Development (BUILD) revealed that 52 percent of SMEs had to stop operation after the shutdown enforced to slow coronavirus outbreak disrupted countrywide supply chains.

The government should come up with insights and guidance for small businesses searching for ways to cope with the operational stress generated by Covid-19, said BUILD Chairperson Abul Kasem Khan.

SMEs are the worst victims of the Covid-19 pandemic and a refinancing scheme can be a useful tool to improve access to finance for the SMEs, he added.

The dialogue on "Covid-19 Economic Crisis and SMEs of Bangladesh" was joined online by Industries Minister Nurul Majid Mahmud Humayun.

Speaking at the programme, Barrister Nihad Kabir, president of the Metropolitan Chamber of Commerce and Industry, said the small and medium sectors are often lumped under the same category without taking into account the gulf of difference in size between the two sectors.

"Small borrowers are unable to follow the regulations followed by medium or large borrowers. Only Tk30 crore was disbursed in the stimulus package of working capital for SMEs," she added.

Shams Mahmud, president of the Dhaka Chamber of Commerce of Industry, emphasised on exploring new opportunities to solve the crises faced by the SMEs.

"There should be a drive to attract more foreign direct investment in the coming days and to integrate the SMEs into the value chain through an SME linkage policy," he added.

Speakers said at the programme, in the absence of a database, SMEs cannot receive benefits from government stimulus packages.

Even these small entrepreneurs are not getting the cooperation of banks. This has created the risk that many SME entrepreneurs will be lost to the Covid-19 epidemic.

Now, in order to save SME entrepreneurs as well as to bring them under government financial incentives packages, a database and incentive loan disbursement policy must be formulated.

Dr Monzur Hossain, a senior research fellow of the Bangladesh Institute of Development Studies, said it should be recognised that while MSMEs are the main drivers of the economy of Bangladesh, they have received the hardest punch due to the pandemic.

"The stimulus package announced by the government for CMSMEs is undoubtedly a praiseworthy initiative, but the implementation process of this package needs to be more effective to reach the beneficiaries who may find it difficult to avail bank credit," he added.

Safiqul Islam, managing director of the SME Foundation, said the Covid-19 pandemic hit at a time when business expansion in Bangladesh was occurring very swiftly.

Now, the expansion of business, as a whole, and SMEs, in particular, has stopped due to the disruption of production owing to the prolonged lockdown, he added.

"This crisis can cause workforce layoffs in the SME sector which can greatly threaten the country's economy."

Asif Ibrahim, chairman of the Chittagong Stock Exchange, said the government set a good example of stimulus package disbursement to garment workers through mobile banking accounts, and similar efforts should be undertaken for disbursing SME credit.

Mentioning that it will be a serious challenge for the government to include the informal SME sector in formal and traditional financial channels, Rashedul Karim Munna, managing director of the Creation Ltd, said, "An SME database should be formulated to informally identify SMEs."

Industries Minister Nurul Majid Mahmud Humayun responded to the suggestions, acknowledging the need for a comprehensive database for the cottage, micro, small and medium enterprises (CMSME) sector.

He said a complete database will help the smooth distribution of credit to all affected CMSMEs under the stimulus package.

The minister also said under the Ministry of Industries and with the assistance of SME Foundation, a CMSME database can be prepared across the country.

The online dialogue was organised by Resurgent Bangladesh, an initiative to help the country's private sector in the context of Covid-19-led economic shocks.

Dr M Masrur Reaz, chairman of Policy Exchange, moderated the session and a number of SME entrepreneurs and policy experts spoke at the event.

Ferdaus Ara Begum, chief executive officer of BUILD, presented the findings in her keynote address.

She said due to the lockdown most businesses had been at a standstill for more than two months. They are now struggling to pay salaries to their employees and bear other related costs.

Ferdaus Ara said services industries took a heavy hit as they are unable to provide their services and generate revenue to sustain themselves; the entrepreneurs who are involved with boutiques, restaurant and beauty parlour business are experiencing massive losses.

Additionally, entrepreneurs lost the summer market along with the Bangla New Year and Eid-ul-Fitr market. They had invested a lot of money in the latter as they attribute the maximum number of sales in a year to this occasion.

Kohinoor Yeasmin, chief executive officer of Tranago, suggested development partners engage in a common platform to develop a grant for SME support. The government should take initiatives to introduce SME entrepreneurs to digital marketing platforms and engage the entrepreneurs in those spaces.