• Thursday, Aug 05, 2021
  • Last Update : 01:52 am

Covid-19 impact: Micro, small, medium enterprises in dire straits

  • Published at 05:43 pm October 20th, 2020
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SMEs are an important arm of economic growth Mehedi Hasan/Dhaka Tribune

On the other hand, 83% of firms have reported losses during the last 30 days of the period of the survey

Around 37% of workers in the country's micro, small, and medium enterprises (MSMEs) have lost their jobs, either temporarily or permanently, while 70% are now in vulnerable circumstances with 94% of enterprises experiencing a sharp drop in sales due to the impact of Covid-19, says a survey. 

It has also found that 91% of local businesses have suffered the worst decline in cash flow due to the economic ramifications of the virus.

On the other hand, 83% of firms have reported losses during the last 30 days of the period of the survey.

The findings were revealed yesterday in a survey, ' Business Pulse Survey: Impact of Covid-19 on MSMEs in Bangladesh'.

The survey was  carried out between June and August 2020 by the IFC and the World Bank, in partnership with the UK’s Foreign, Commonwealth and Development Office (FCDO).

The survey covered 500 MSMEs across the eight divisions of the country. 

Survey findings

As per the findings, around 79% of firms were open during the time of the survey, and the remaining 21% were temporarily closed, either by their own choice or due to the government's instructions.

About 18% of the surveyed firms had retrenched workers in response to the shock and total job losses were reported at 37%, while 70% workers were in vulnerable jobs. 

Firms located in urban areas have been affected more than those located in rural areas.

The pandemic has had adverse effects on sales of the surveyed firms, where 94% had decreased sales from a year ago.

The average change in sales for micro firms stood at 51% while those for small and medium firms combined stood at 55%.

Reduction in the number of working hours was a severe and immediate impact of COVID-19, says the survey report. 

About 58% of surveyed firms have reported reduction in the working hours of at least one worker, which has affected 12% of the employment covered in the survey.

The survey found that 83% of businesses reported making losses in the month preceding the study. The situation was particularly dire for fashion and clothing businesses, which suffered a 65% fall in sales, with over a third having to close their doors because of the pandemic’s impact. 

About 91% of Bangladeshi businesses suffered the worst decline in cash flow, compared with similar economies such as Vietnam with 66% and Indonesia with 69%.


“We are working hard to bring the economy back to its normal stage,” said Bangladesh Bank governor Fazle Kabir. He joined the virtual event as chief guest.   

“I appreciate the IFC’s efforts to generate these valuable insights into the MSME sector. We are committed to implementing the stimulus packages and have instructed banks to provide loans to cottage, micro, small and medium enterprises at subsidized interest rates.” 

“Micro, small, and medium enterprises are key drivers of Bangladesh’s economy which account for about 25% of GDP, and employ over 20 million people,” said Mercy Tembon, the World Bank’s Country Director for Bangladesh and Bhutan. 

“The COVID-19 pandemic has hit small businesses and informal workers hardest with loss of income and jobs. While going forward, it will be important for Bangladesh to support the recovery of micro, small-medium enterprises, especially women-owned businesses and remove constraints to their access to credit.”

The survey shows most businesses are expecting a negative impact on sales and jobs over the next six months. Seventy per cent of micro firms were not optimistic about their future sales prospects. 

“Even before the pandemic hits, these Bangladeshi businesses were already in a precarious position, as they operate on slim margins,” said Wendy Werner, IFC Country Manager for Bangladesh, Nepal and Bhutan. 

“The fact that these businesses are now in extreme distress highlights the urgent need to boost the resilience and capacity of these enterprises so they can ultimately preserve jobs and be on the road to recovery.” 

In order to recover from this crisis, businesses identified cash transfers, access to new credit, and loans with subsidized interest rates as the top three most needed policy support. 

“A majority of the medium-sized firms preferred “deferral of rent” and “deferral of credit payments” as they needed policy options, while micro and small firms both preferred “cash transfer”,” said Ananya Wahid Kader, Senior Operations Officer, IFC, in her keynote presentation.

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