SMEs urgently need affordable financial assistance

Bangladesh’s small and medium enterprises (SMEs) are in dire straight as to how exactly to sustain after an enormous drop in production and sales because of Covid-19 pandemic.

Near eight million entrepreneurs in the sector have already been incurring losses because of no production and sales. So that you can address the massive loss, cottage, small and medium enterprises (CSMEs) are in a race to get bailout facilities announced by the federal government. If the much-discussed SME sector is brought under stimulus facilities soon, the economy will probably return to normal, without doubt.

Specifically, most enterprises run by women have shut down their finding no alternative methods to run production. It is vital to note that earnings reduction in the SME sector was recorded at 66 % in the Fiscal year 2019-20 with around 92,000 crore loss.

There is absolutely no denying that SME sector have been playing a substantial role with regards to economic growth. With 25 per cent contribution in GDP, the sector has, recently, become flourishing to a great extent. Besides, the sector runs with employing over 20 million labour force were only 4 million in the country’s Ready Garment Garment (RMG) sector. So, it is usually said that the sector is a key driver of the Bangladesh economy.  The deadly virus left a large number of workers unemployed. What's worrying is that the bailout facilities announced by the federal government did not reach them properly.

Those in the SME sector is in circumstances of uncertainty since it got little backing from the federal government and without getting that it's impossible to generate a come-back. The ailing sector now needs huge financing as working capital. In regards to a dozen proprietors of textile mills in Narayangonj and Narsinghdi suffered heavy losses because of COVID-19 has hit the sector attacked them severely. Despite the fact that, They could not repay banks, and NGOs loans for not generating and selling grey cloths amid pandemic. With a view to help ease SME sector woes, the central Bangladesh Bank has given numerous policy supports. But, most Corona -affected producers in the united states do not know the facts of praiseworthy policy supports. With a huge information gap, they remain passing idle time instead of starting a business. So, the need for boosting campaign regarding stimulus facilities for the sector is a must right now.

“Sharuj Textile of Araihazar under Narayongonj district is still running production amid huge loss” proprietor of Sharuj Textile - Mr Sharuj told this writer. He did not get his dues worth over Taka 8 million from local buyers as they also had no sell.. He said lenders are inspiring the entrepreneurs who've good relations with the banks. The private banks are assisting the influenced business people in lots of ways where public sector banks are showing little interest in giving packages. With a complete of 28 machines and 10 workers, the factory has been incurring huge losses after pandemic hit Bangladesh.

Local buyers have also become insolvent. Every worker gets Taka 20,000 monthly as wages from the factory and monthly for mending machineries is Taka 45,000, according to Sharuj. He started production along with his own funds and today he is trying to manage finance under government bailout packages.

Former manager of the factory, Amjad Hossain, echoed the Sharuj and that without government support the factory will turn off. To maintain cost of production with his own capital is very impossible.

The SME sector makes up about one-fourth of GDP and generates almost one-third of its total employment. According to the Bangladesh Bureau of Statistics (BBS) - The united states happens to be home to 7.8 million small and medium-sized organizations with 25 million workers. BBS data show a total of 5 crore 70 lac persons are engaged in the commercial sector. Of these, 80 % employees are involved in SME sector. A recently available study released by International Finance Corporation (IFC) revealed the complete picture in SME sector that experienced during Covid-19. Only 0.4 per cent of the country’s micro, small and medium enterprises (MSMEs) received financing from financial institutions- the study said. Some 24 % of the MSMEs didn't receive any financing under stimulus packages and 74 % did not find out about packages- the survey report also said. Some 91 per cent of Bangladesh businesses suffered the worst decline in cash-flow weighed against Vietnam 66 per cent and Indonesia 69 %. Around 37 % of the employees in MSMEs lost their jobs as 94 % enterprises experienced a sharp drop in sales because of pandemic- the repost said. Globally, worth a complete of $ 8.0 billion was announced from IFC to greatly help to sustain economies where Bangladesh was nominated to give US$ 75 million as working capital.

Sadly, around 94 per cent of MSMEs in Bangladesh experienced a sharp drop in sales because of outbreak where 92 per where Sri Lanka faced 92 %, Afghanistan 88 per cent, India 86 %, Nepal 83 % and Pakistan 68 %. India got around 38 %, Thailand 33 per cent, Malaysia 24 % and Bangladesh 22 % of total stimulus packages for Covid situation.

The SMEs in Bangladesh still now have problems with a 2.8 billion US dollar financial gap. To handle the woes of afflicted entrepreneurs in this crisis moment, the necessity for boosting financial support is crucial right now. The time demands the higher interest of the country to back Cottage, Micro, Small and Medium Enterprises.

A decent database on small-scale businesses should be kept as record with details with the collaboration of local administration. When possible, SME center at every Upazila under state-owned SME foundation might be launched looking to assist the businesses in lots of ways. Besides, Non-Government Organizations ( NGOs) alongside banks need to scale up finance the businesses having little capital through the crisis. The government earlier announced a Taka 20,000 crore for the cottage, micro, small and medium enterprises in response to Covid-19. The newspapers reports suggest that the distribution of packages had not been satisfactory as expected.

It is important to note that the owners of large conglomerates in the country are dominating the firms having tiny capital. The reach of SME products in large cities is becoming so complex for the dominance of the capitalist. A technological innovation coupled with recently launched digital banking will help small entrepreneurs to get finance timely. Cost-effective financial assistance for SMEs is a must.  To mitigate risk, small loan guarantee scheme will be effective much. Nevertheless, for the lack of research activity on SMEs and the existing VAT system are responsible for the poor level of production. With a view to compete with developed economies, there is absolutely no option to diversity exportable products. Only SME products our emerging economy never runs fast. Why are we stumbling to market the much-needed sector during pandemic despite having huge government support? Following LDC graduation, Bangladesh is set to lose existing advantages from europe (EU).

Thus it is very important that correct measures are taken immediately to greatly help these enterprises to sustain economically. Why don't we utilize government stimulus package and IFC fund properly to save the ailing sector hit-hard by Covid-19.