According to the findings of the survey, the pandemic has put poorer enterprises at a higher risk of permanent shutdown
A survey has revealed that about 75% enterprise owners are extremely worried about the future of their businesses.
The survey was conducted by the BRAC Institute of Governance and Development (BIGD). Nearly 2,000 firms were reached through telephone from July 14-23 for their feedbacks.
Titled, “Effects of Covid-19 on Small Firms: Evidence from Large Scale Surveys of Owners and Employees”, the survey was unveiled through an online media briefing on Sunday.
Among the different sectors affected by Covid-19, effects of this global pandemic have been particularly acute on this essential sector.
According to the findings of the survey, the pandemic has put poorer enterprises at higher risks of a permanent shutdown.
The study shows that enterprises which had lower capital during the pre-Covid-19 period are less likely to operate their businesses at full capacity after the end of the lockdown. Similarly, after the economy re-opened, poorer enterprises experienced a 49% drop in business while the rate is 25% among the richest enterprises.
Asadul Islam, Professor of Economics at Monash University and Atiya Rahman, Senior Research Associate at BIGD presented the findings.
Executive Director of BIGD Dr Imran Matin said, “This study shows that if you look at the current 'recovery' in a meaningful way and examine the actual rate of profit and revenue, recovery looks very fragile. The intervention provided by the BRAC has multiple components”.
He also said, “We need to look into each of these components and see how they are affecting the enterprises such that we can create a well-designed intervention to help these enterprises overcome the crisis caused by Covid-19.”
The survey says employing over two million workers; the light engineering (LE) is one of the largest sub-sectors of small and medium-sized enterprises (SMEs) in Bangladesh that accounts for 2 % of the country’s gross domestic product (GDP). Among the different sectors affected by Covid-19, the effects of this global pandemic have been particularly acute on this essential sector.
According to the BIGD study, only 2% of the LE enterprises were fully open and 29% were partially open during the lockdown. Since the lockdown was lifted, 61% of the enterprises are now fully operating and more than 37% are cutting down either their business days or hours.
The survey also says that about 61% of the enterprises are facing a shortage of raw materials due to the supply chain disruption caused by Covid-19. To cope with this shortage, majority of them are either reducing their production or increasing their product prices.
The strategy, however, is hardly enough to overcome the loss in sales and profit and while paying expenses, such as rent, utility bills, employees’ salaries, etc to keep the business floating. Understandably, this has made 75% of the enterprise owners highly worried about the future of their businesses.
Research Director of the Centre for Policy Dialogue (CPD) Dr. Khondaker Golam Moazzem said, “The fact that SMEs are still struggling to make profit even after the economy re-opened indicates that the domestic demands constraint caused by the pandemic hasn’t improved yet”.
“Until such improvements are observed, even though it is important to provide these firms financial stimulus support, it is more important to create a special mechanism to support these firms, ” he said.
The survey also says it appears that even female workers are working more days and maintaining health guidelines relatively better than their male counterparts. They are still losing jobs and have the poorest income recovery.
In their presentation, Asadul Islam and Atiya Rahman have warned that if this gender disparity is left unaddressed, it can put women’s empowerment in Bangladesh into jeopardy.
They have also made some key recommendations that include paying special attention to certain highly vulnerable sectors, such as beauty parlours and hotels, and increasing their liberal access to the government stimulus package.