SMEs face long road to recovery

Cottage, micro, small and medium enterprises (CMSMEs), which are the backbone of the economy, have been struggling to revive their battered business as the country entered into the second year of the pandemic.

The income and profitability of CMSMEs took a massive beating from the pandemic that hit the country in March last year.

Activity in many sectors has picked up in recent months. But the recovery rate of the CMSME sector is weaker-than-expected because of feeble financial health compared to that of the medium and large industrial units.

Most of the CMSMEs were closed for a long time due to the countrywide lockdown announced by the government last year and for the shortage of funds.

The highest number of job loss also took place in the CMSME sector.

For instance, Design by Rubina, a small leather and jute goods factory at Mirer Bazar in Gazipur, resumed its operation from December with only eight workers instead of 22 workers who were employed before the pandemic.

The factory was closed between April and November last year. Its pre-pandemic monthly sales amount was $5,000, which included exports.

The fallouts of Covid-19 shattered the dream of Rubina Akter Munni, managing director of Design by Rubina.

Her buyers in Dubai, the Philippines, Qatar and China are yet to pay her $1 lakh yet, hurting her incomes, the fashion designer-turned entrepreneur said.

She is not alone.

The pandemic has shattered the dreams of thousands of budding entrepreneurs in almost all sectors, from garments, leather, jute, food-processing to plastic goods, printing and packaging.

The country's main export-earning garment industry witnessed the severest impact when international clothing retailers and brands either cancelled or put hold work orders worth $3.18 billion. As the situation has improved to some extent, 90 per cent of the cancelled ordered have so far been reinstated.

Naim Bazlul Karim, managing director of APT Sweater Ltd, a small garment exporter based in Kamarpara area in Dhaka, faced a significant loss as his factory was closed for three months from April to June.

During the period, he did not get the subcontracting orders from large factories he used to receive as even the bigger industrial units have been suffering from the shortage of orders from international clothing retailers and brands.

"I have been trying to get back more work orders from my buyers," said Karim, who received an order worth $200,000 from a buyer this month.

He employs 150 workers. He has not terminated any worker despite the closure of the factory for three months.

"My business is reviving gradually, and I recently recruited a few workers," said Karim.

Despite the disastrous situation, some small entrepreneurs have done well, although their number is not high.

Z Pack, a small packaging factory at Salna in Gazipur, saw an increase in its business. The management of the factory did not close operations even during the pandemic.

"My buyers were satisfied as I supplied the products when almost all such factories were closed," said Mesbahul Alam, the proprietor of Z Pack.

"So, the buyers have continued placing work orders with me."

Alam recruited nearly 45 new employees, although he had wanted to hire 70 more workers to take the tally of the employees to 100.

During the pandemic, the entrepreneur helped many people financially. It came to his mind that it would be better if a job is offered to the workers so that they can earn money during the crisis, leading him to new hiring.

Before Covid-19, his monthly sale was Tk 30 lakh to Tk 40 lakh. Now, it has reached Tk 1 crore.

Alam said there had been about a 20 per cent rise in the prices of packaging raw materials such as chemicals, ink and plastic granola due to the abnormal hike in freight charges.

He received Tk 15 lakh in loans from the stimulus package.

The emerging agro-machinery tools business in the country has not spared from the severe impact of the pandemic.

Thousands of small and medium enterprises involved in the manufacturing of modern agriculture equipment have grown across the country due to the emergence of modern technologies in the farming sector.

"I have been struggling to revive my business as the sales of agricultural equipment dropped significantly due to the income losses of rural traders and affluent farmers," said Md Sheikh Saadi, managing director of Agro Machinery Industry, which produces mainly paddy reapers and grass cutters at his Darshana factory.

More than half of his 25 employees were terminated because of the pandemic.

"I am in big trouble also because my buyers are not paying Tk 1 crore for the product I sold on credit. My buyers are also in big trouble now," said Saadi. He said he failed to receive any loan from the stimulus package because of stringent conditions.

At least 80 per cent of CMSMEs were affected because of the pandemic, according to Md Ali Zaman, president of the SME Owners Association of Bangladesh.

Almost all CMSMEs were closed for at least three months between April and July. Big industrial units were not closed during the period, he said.

"Many of them could not complete the orders they received before the pandemic, so they did not get the payment."

Zaman blamed the stringent banking conditions that made it difficult for most CMSMEs to receive the loan from the stimulus package.

"So, the financial flow to CMSMEs was severely affected," he said.

Some 70 per cent of the stimulus money was taken by the big units, he said.

The CMSMEs have not made the turnaround fully. As a result, employment in the sector has not rebounded. Most of the CMSMEs have halved the number of their employees as they are struggling to survive now, said Ferdaus Ara Begum, an expert on the CMSME sector.

"We are recovering, but it will take a long time," she said.

From the Tk 20,000-crore stimulus fund for CMSMEs, about 59 per cent has been disbursed so far, said Begum, also the chief executive officer of the Business Initiative Leading Development.

The introduction of a credit guarantee scheme, re-financing schemes, and some other facilities have expedited the disbursement of loans in the CMSME sector, she said.

Of the 8.8 million industrial units in Bangladesh, 99.8 per cent fall under the CMSME category, and most of the informal jobs for millions of people are generated by the CMSMEs in Bangladesh.

Md Masudur Rahman, chairman of the SME Foundation, said most of the CMSMEs missed two big business seasons, including Pahela Baishakh and Eid-ul-Fitr, last year.

"So, these units are struggling to survive," he said, adding that Tk 14,000 crore has been disbursed from the stimulus fund for the CMSME sector.

Another Tk 3,000 crore from the SME Foundation is set to be disbursed among the entrepreneurs at a 4 per cent interest rate.

"So, it is expected that the CMSMEs would revive within the next six months," he said.