Small businesses see fast turnaround

Small industries, identified by the Bangladesh Bank as the third sector hardest hit by Covid, rebounded strongly as output growth exceeded pre-pandemic levels following the restart of economic activities.

Their manufacturing growth even seems to be going faster than that of large industries.

The small and medium-sized enterprise (SME) sector saw output grow 26.29% year-on-year in July-October last year, down from 10% growth in the pre-Covid era .

On the other hand, the output of major industries increased by 18% year-on-year over the same period, according to Bangladesh Bank data.

In April-June 2020, after the pandemic hit the country, small businesses suffered a 15% drop in goods manufacturing, while large ones saw a slowdown but still maintained output growth by 7%.

The SME has started to recover since July last year and reached a stable position in the last half of FY21, according to central bank data.

Rashed Imam, a clothing maker aimed at the local market – which had to shut down its factory during the pandemic, returned to production at full capacity six months ago, aiming to achieve good returns with big sales before the upcoming Eid festival.

Stimulus loan helped SMEs survive

Rashed, a small entrepreneur who supplies products to street vendors and small traders, resumed production after making new investments by taking out a stimulus loan.

Its return to production was reflected in the strong rebound of the small manufacturing index.

Speaking to The Business Standard, Rashed, owner of Moni Fabrics, said: “Small manufacturers like me who somehow survived the pandemic have now returned to production, but some could not overcome the crisis.”

Although sales have yet to reach the expected level, they have started production at full capacity targeting the upcoming festival, he noted.

He said small businesses mostly depend on festival-centric sales.

The filing of loan applications in large numbers, from SMEs to banks, also testifies to the strong recovery.

For example, Brac, an SME lender in the country, is seeing demand for SME loans surpass pre-pandemic levels.

From October last year to January this year, the bank disbursed Tk 1,400 crore to the SME sector on average every month, while the amount was around Tk 1,200 crore per month in pre-pandemic period, depending on the bank.

Total bank lending to small industries rose 9.69% year-on-year between July and September last year, while it fell 19% in the same period of 2020, the data shows. of the Bangladesh Bank.

When contacted, Syed Abdul Momen, Deputy Managing Director and Head of SME Banking Division of Brac Bank, said the recovery of small businesses is very impressive as it is reflected in the strong demand for loans. Sales of some small businesses have also exceeded pre-pandemic levels.

He said sales of locally made clothing products have increased significantly amid limited imports from China amid the pandemic. Moreover, the implementation of government mega-projects has lagged, giving life to other small businesses, such as steel, rod and cement.

Brac survey shows SMEs doing well

Brac also conducted a survey on its own consumption, which also showed an impressive return from SMEs.

The survey found that the state of business operations improved to pre-pandemic levels in December last year, which fell to 33% shortly after the imposition of the first lockdown in April 2020.

However, functioning status improved to near pre-pandemic level after the first lockdown was lifted, but fell further to 48% during the second and third lockdowns.

Sales in the small business sector rebounded to 86% in December last year, after falling 27% during the second and third shutdowns imposed in April and July last year. Sales fell 18% during the first lockdown period, the survey found.

The survey showed that sales in the SME sector were severely affected during the first lockdown, but the impacts of the second and third lockdowns were less, as the recovery in sales was over 50% during these two last periods of confinement.

Pharmaceuticals, food processing, agriculture, groceries and consumer goods were the least affected sectors, according to the survey.

Jobs are also seeing a rebound

The strong rebound also revived the labor market.

For example, Rabeya (pseudonym) works in the Dhanmondi branch of a renowned beauty salon that lost her job during the pandemic and got it back after the first lockdown was lifted. At first, she joined her workplace with half of her previous salary, but for the past six months she has been on her full salary.

Sharing her fight against the pandemic with TBS, she said, “I couldn’t pay the rent for my house for several months. It was very difficult for me to stay in Dhaka without a job because I couldn’t beg or take relief. Now I get a full salary but we have lost many colleagues who left Dhaka during this time of crisis.”

Brac’s survey showed that the recovery of SMEs also restored jobs lost during the pandemic.

The number of employees fell by almost 8% during the third lockdown in July last year, but fell back to 82% in December 2021, according to the survey.

The Bangladesh Bank, in its survey on the impacts of Covid-19 released in March last year, identified the SME sector as the third hardest hit by the pandemic.

Following the investigation, the central bank asked banks to increase lending support to vulnerable businesses and eased the rule for getting stimulus loans for SMEs.

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