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Studies

How Resilient Are Female Online Entrepreneurs? Findings From the COVID-19 Shock

The COVID-19 induced economic slowdown has a mixed impact on online businesses in Bangladesh. On one hand, online businesses often have no access to formal financing and insurance, putting them at risk of going out of business, but on the other hand, social distancing measures have potentially increased online shopping tendencies among consumers. This study examines the impacts, both negative and positive, of the COVID-19 pandemic on the online business sector of Bangladesh. 

Researchers: Mehnaz Rabbani; Iffat Zahan; Maria Matin

Timeline: May-July 2020

Status: Completed

Publications:

Contact: Iffat Zahan; iffat.zahan@bracu.ac.bd

Context

COVID-19 caused a slowdown in all businesses, including online businesses in Bangladesh. Most small businesses were at risk of closure. Online businesses in Bangladesh are mostly run by home-based entrepreneurs, particularly women. Apart from the common challenges of disrupted supply chains and lowered demand for non-essential products, these online businesses face some unique challenges. They usually operate in the informal sector, with no access to formal financing or insurance. Employees in this sector are also all on informal contracts. For many online businesses, particularly in the fashion sector, April-June is the peak season (Pohela Baishakh and Eid) and revenue from this season supports costs for the rest of the year. The season coincided with the hight of the pandemic in Bangladesh, which could prove disastrous for many online entrepreneurs.

While online businesses face trouble in the coming months to recover from this shock, there are also advantages particular to this sector. For essentials, many are reverting to online shopping to avoid going out. Customers are also spending significantly more time on social media at this time, which means exposure time to photos and live feeds is higher. Online businesses have minimal overhead expenses, making it easy to scale down temporarily.

The female online entrepreneurs are playing a critical role in the digital economy creating employment and promoting entrepreneurship among young  Bangladesh women. So, to understand the resilience of these female entrepreneurs in the face of the COVID-19 shock, we undertook this study.

This study is relevant to SDG 5 (Gender Equality), particularly to achieving gender equality and empower all women and girls.

Research Questions

  1. How resilient are online businesses to market shocks?
  2. What are the specific challenges faced by female home-based entrepreneurs in the informal sector?
  3. What kind of support would be required to help these businesses to survive?

Methodology

We conducted two rounds of an online survey of 122 online entrepreneurs and subsequent phone interviews of 20 female entrepreneurs. The first round of the survey was conducted in April and the second one in June 2020. We targeted the entrepreneurs using Facebook as their business platform. We identified potential entrepreneurs through searching by product category, and through a snowballing method (e.g. Facebook’s suggestion of similar pages).

Findings and Recommendations

After a few months into the crisis caused by COVID-19, businesses are trying to adjust to the new situations while facing some challenges. Some important highlights are:

  • Even though many businesses could not generate expected revenue and recover the investment during the Eid, they are
    more confident than the last time about bouncing back to their previous stage in a reasonable timeline. They are adjusting to the “new normal” as they have a better view of the situation within these three months of crisis.
  • To sustain, these businesses are adopting diverse coping mechanisms—laying off employees, giving discounts, and cancelling orders. Few of them also have stopped their cash on delivery service to minimize cash transaction by hand.
  • Businesses that could temporarily close down are smaller in size and most are not the only income source for the entrepreneurs.
  • As predicted during the first round, businesses have laid off employees. According to their ability to pay the employees, more employees are predicted to be laid off within the next seven months.
    These businesses have no access to formal financial support. They mostly rely on personal savings and loan from friends and family.
  • For guidance, these businesses mostly depend on the online entrepreneur forums and friends and family.
    The women entrepreneurs are struggling with simultaneously doing household chores and running the business. They also show symptoms of poor mental health.

Being online, the demand for essential products has remained unchanged. Online businesses have been able to downsize and sustain. From our two rounds of the survey, it is evident that these female entrepreneurs have been flexible and adaptive in the face of COVID-19. However, it is important to note that they are unable to access formal support from external government and non-government sources. To sustain, formal financial support is necessary for these businesses.

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