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The SME sector of Bangladesh contributes 25% to the GDP in addition to the 7.8 million employment and 31.2 million livelihoods it provides. With the extension of the lockdown, SMEs are being immensely impacted.
In order to revive the sector, the government of Bangladesh has already introduced a Tk 20,000 crore stimulus package. However, the question still remains – Will SMEs be able to survive the pandemic and continue to operate in the same way in the post-COVID world?
“Close to 31.2 million people’s livelihood is dependent on SMEs and Startups. If we can not find a solution to come out of the crisis, this large population will be gravely impacted, creating a chain of reaction in the entire economy.”
– Bijon Islam, CEO of LightCastle Partners
To understand the current impact of the crisis on SMEs in detail, LightCastle Partners & Sheba.xyz collaborated on an independent study on the COVID-19 impact on the SMEs of Bangladesh.
The detailed findings of the study were presented at a webinar, titled “A deep-dive into the COVID-19 impact on the SME Sector of Bangladesh”, jointly organized by LightCastle and Sheba.xyz.
In addition to the impact, the panelists brought forth discussions around the stimulus packages, banks’ role in the disbursement processes, the contribution of MFIs, the importance of digitization, and the role of SMEs during the crisis.
The panelists for the session were
1. Md. Ashraful Alam, Project Country Coordinator, SHIFT, UNCDF
2. Syed Abdul Momen, Head of SME Banking, Brac Bank
3. Dr. Akond Md. Rafiqul Islam, Sr. General Manager, PKSF
4. Samiul Kabir, Chief Strategy Officer, Sheba.xyz
5. Nazeem Hasan Sattar, General Manager, SME Foundation
6. Shawkat Hossain, Managing Partner, Velocity Asia
7. Bijon Islam, CEO, LightCastle Partners
“We couldn’t sell flowers of worth more than 12 lacs, neither can we layoff our employees, nor can we sufficiently pay salaries”
– Shelly, Florist
The study was conducted in late April with over 230 SME respondents from all over Bangladesh. The respondents mainly were from Trading & Production (48.4%) that includes Perishable & Grains, Poultry, Dairy, Fisheries, Jute Diversified Products, and Retail Stores; and Service Industry (51.6%) that includes food catering, electrician services, laundry, beauty salon, MFS agent, and restaurants.
Some of the key highlights of the findings were:
“Disbursement of loans, cashless transactions, and digital supply chain should be implemented immediately to support the SMEs.”
– Samiul Kabir, Chief Strategy Officer of Sheba.xyz
Course availability of around Tk 3,000 crore has already been diminished during the lockdown period and the survival of the sector largely depends on the banks and financial institutions.
Some key points discussed were:
“The main concern for the SMEs now is to get the funds immediately otherwise they are going to collapse.”
– Dr. Akond Md. Rafiqul Islam, Sr. General Manager, PKSF
“We are experiencing increasing demands due to the lockdown and the government has allowed us to continue with the delivery processes. However, due to supply chain disruption, our supply has significantly decreased which isn’t allowing us to benefit from the demand surge.”
– Abu Darda, CEO, Parmida.com
With only four months of cash runway, a large cluster of SMEs is on the verge of going bankrupt. If the impacted enterprises do not get support immediately, the revival of the sector in the near future seems bleak.
Some key concerns that were raised:
“The stimulus package should have been designed upon taking the feedback from all the stakeholders first, in that way disbursement could have been much more smooth.”
– Syed Abdul Momen, Head of SME Banking of BRAC Bank.
Adapting to digital solutions is key, especially during such uncertain times. Data shows that customers are quickly embracing digital channels for their transactions. During the span of two months, bkash has experienced a 12 times increase in transactions from 5,000 to 75,000.
The lockdown has propelled the much-needed digital transformation and brought forth very important learnings:
“Alternative channels need to be generated by streamlining organizations like Karmo Shongsthan Bank, SME Foundation, and the public banks should come forward in providing loans to the affected entrepreneurs”
– Nazeem Hasan Sattar, General Manager of SME Foundation.
“Fintech platforms should come forward in digitizing these SMEs to equip them better for such types of crisis”
– Md. Ashraful Alam, Project Country Coordinator of SHIFT, UNCDF.
In conclusion, if we genuinely want to help these affected SMEs, we have to put ourselves in their shoes and tailor the facilities for them to assist them in navigating through the crisis. Similarly, it is essential to provide in-kind support in addition to funds.
To learn more insights, check out below:
This article was written by Mehad ul Haque, Senior Business Consultant, and Ishtiak Mourshed, Trainee Consultant from LightCastle Partners. For any queries, you can reach out at [email protected].
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