While the Bangladesh economy has largely recovered from the initial COVID-19 shock, the recovery has been uneven across industries. Its effect remains severe on the economic and psychological wellbeing of workers in micro and small enterprises, an industry that contributes one-fourth of Bangladesh’s GDP and employs 56% of the population.
BRAC Institute of Governance and Development (BIGD) and Monash University, Australia in January 2021 completed the second round of a telephonic survey on the impact of COVID-19 on micro and small enterprises in Bangladesh. The first round was conducted in June 2020. Most of the surveyed firms were light engineering and 16% were from service sectors like tailoring and beauty parlours. The survey finds that recovery has been the lowest in female labour-intensive sectors and those with higher health risks, e.g., beauty parlours. Prof Asad Islam, Director of the Centre for Development Economics and Sustainability (CDES), Monash University, and Atiya Rahman, Senior Research Associate, BIGD, presented the findings at a webinar on 31 May 2021.
Overall, business activity returned to pre-COVID levels just before the second lockdown, but three per cent of the firms remained closed. This clearly points to reopening barriers in the industry. However, most of the firms were open for business.
Especially, the workers of these enterprises remain at a much greater risk. Though unemployment among male workers reduced to 15% in June 2020 from an extremely high rate during the first lockdown, it has remained unchanged since. Unemployment among female workers has in fact worsened from last June and stands at a whopping 54%. Thus income is down from pre-COVID levels by 24% for men and 56% for women, eight months after the first lockdown was lifted. Consequently, psychological stress during the pandemic is significantly higher for female workers, particularly those who are unemployed. Besides, the study finds that health guidelines compliance has gone down significantly from June 2020, which poses significant risk to workers’ health in the escalating pandemic situation. Dr Imran Matin, Executive Director of BIGD, remarked it is critical that safe reopening measures and hygiene practices are promoted, as micro enterprises with greater health risks were hit hardest.
Although 97% of the firms have reopened, sales are down 17% below pre-COVID, particularly in the service sector, e.g., beauty parlours and cosmetics, clothing and tailoring, general stores, grill workshops, and restaurants. Sales at beauty parlours and cosmetics shops—industries predominantly owned by female entrepreneurs and run by female workers—are 57% below the pre-COVID level.
For enterprise owners, reduction in order remains the most pressing concern eight months since the first lockdown was lifted. More than 50% of the enterprises, especially light engineering firms, expressed concerned about the excessive price hike of raw materials. It indicates the importance of deeply analysing the supply chain of light engineering sector. Many enterprises are also concerned about how to pay wages.
Almost half of the businesses have resorted to loans between April 2020 and January 2021. A quarter of the loans came from NGOs, and another 16% came from family or near ones. Only four per cent of the received aid was from the government. Though most SMEs know about the stimulus package, only six per cent have applied and just one per cent have received the stimulus so far. Applicants mentioned a long application process and banking issues as the prime difficulties in applying. However, over half of the respondents—those who know about the package but have not applied—are willing to apply in the future.
The researchers remarked that adequate support and practical health guidelines are essential to keep enterprise owners optimistic about the future. Women in labour-intensive enterprises are the most vulnerable. A productive safety net that includes comprehensive training and financing is needed to get them out of the unemployment trap. They also mentioned that there is a latent demand for government stimulus, one that is not reflected in the application rate. Simplifying the process and raising awareness of the stimulus package will encourage more people to apply.
Additional Secretary Luthfun Nahar Begum, Ministry of Industries, said that, despite low uptake, the government has already introduced 23 stimulus packages amounting to 1.24 trillion BDT in support.
Ferdaus Ara Begum, CEO of Business Initiative Leading Development (BUILD), remarked there is a significant financing gap of 8.8 billion USD for micro enterprises, according to a World Bank report in 2019.
Dr Monzur Hossain, Research Director at Bangladesh Institute of Development Studies (BIDS), suggested the government could involve NGOs in stimulus design and distribution, since NGOs have been the major contributor of such support to micro enterprises so far.
The webinar was moderated by Dr Imran Matin, Executive Director of BIGD. Shams Azad, Chief Operating Officer at BRAC Microfinance, was also present at the webinar as a discussant. Other noted researchers and media persons were present at the online event.
The survey was based on a sample from BRAC’s Skills Development Program and a sub-sample from BRAC Bank. The study is part of the COVID Collective, a research platform supported by the UK Foreign Commonwealth and Development Office (FCDO) and based at the Institute of Development Studies (IDS).
