In Bangladesh, as the pandemic has impacted businesses of all sizes, as well as lives and livelihoods, evidence is mounting that businesses that employ between 1 and 249 workers – officially the micro, small and medium-sized businesses – bear the brunt of the economic downturn. According to a recent World Bank survey, “micro, small and medium-sized enterprises (MSMEs) are particularly affected due to pre-existing vulnerabilities and their lower resilience”. Before our country was hit hard by the pandemic, more than 7.8 million SMEs contributed 25% of the country’s GDP and 36% of jobs. The government had already planned to increase their contribution to 32% of GDP by 2024 to generate more jobs. Therefore, a crucial element for the revival of our employment, our incomes and our economic dynamism is the resuscitation of MSMEs. That is why, as we celebrate June 27 as MSME Day, it is important to raise awareness of their contribution to sustainable development and the global economy.

Since 2017, the world has celebrated MSME Day in recognition of the importance of MSMEs in achieving economic growth and sustainable development goals, promoting innovation and creativity, and creating jobs globally. MSME Day 2021 is observed amid the coronavirus pandemic and subsequent lockdown around the world, which has had a far-reaching effect on small businesses.

For all the latest news, follow the Daily Star’s Google News channel.

MSMEs play an important role in most national economies, especially in developing countries. The definition of MSMEs varies, as does the statistical data. Formal MSMEs contribute up to 45 percent of total employment and up to 33 percent of gross domestic product (GDP) in emerging market economies. These figures would be considerably higher when informal MSMEs, including cottage industries, are included. In Bangladesh, MSMEs in services, commerce and small industries can be seen as the backbone of the economy.

In the case of Bangladesh, whatever tons of statistics attest to the contribution of MSMEs to investment, employment, income generation, poverty eradication, women’s empowerment and reducing inequalities, it would be no exaggeration to assert that the national budget, financial institutions and many government programs, including recently inaugurated stimulus programs, routinely bypass these units. They sometimes receive empty talk from political leaders during an election period, but when it comes to a real effort to provide subsidized loans, tax breaks or grants, there is hardly any no evidence that these small, marginal units are doing better than the -child. ”Just the other day our Minister of Industry called for a radical change in our approach to MSMEs to better meet their needs. This comes at an opportune time since for some time our political decision-makers at the highest level have been aware of the shortcomings of our economic policy framework, and in the past we have heard many promises of changes in the rules and programs for the benefit of citizens. MSME Alas, in vain.

It would not be an exaggeration to say that the economic shock induced by the pandemic as well as the lack of financial support from the national government has taken our SMSEs breathless, and they are at their end of the line. A recent study indicates that 80 percent of SMEs have failed to continue their business activities.

In the first stimulus package, the government of Bangladesh allocated Tk 20,000 crore to finance a low interest loan facility to provide working capital to micro, small and medium enterprises. However, according to the finance ministry, while 75 percent of that money was loaned out, only 10.8 percent went to low-income farmers and small businesses. On the other hand, data from the Bangladesh Bank (BB) shows that of the Tk 15,000 crore set aside for MSMEs, the largest share went to those engaged in manufacturing and services. Very few small manufacturing or commercial enterprises have benefited from these loans. It should be noted that Bangladesh Small and Cottage Industries Corporation, SME Foundation, Palli Karma-Sahayak Foundation and other public entities have seen an increasing demand for subsidized loans. BB policy requires 40% of bank loans to be earmarked for MSMEs, but actual disbursement is well below this target. Many advocates, including BUILD and others, have come out to demand direct support for MSMEs in rural and urban areas as an alternative to traditional banking channels.

The Minister of Industry recently recognized that the definition of medium-sized enterprises should be changed to ensure that funds required for MSMEs are channeled to micro and small enterprises, as medium-sized enterprises consume the bulk of these funds. “A new policy was needed to address the issues, including the definition of medium-sized businesses, a business database and mortgages,” he said. His views are consistent with those of international lending agencies. On a related note, just a few months ago, IFC Country Manager for Bangladesh, Nepal and Bhutan, Wendy Werner, said MSMEs in Bangladesh were “already in a precarious position because they were operating on low margins even before the pandemic hit. “

To recap, the problems MSMEs faced during the pandemic have been compounded by some pre-existing illnesses that plague them. These include lack of operational cash flow, low customer demand, business closures due to state foreclosure policies, reduced opportunities to meet new clients, etc. Businesses run by women have been severely affected.

In the context of the SDGs, the World Bank and the OECD had already identified several reasons why the development of MSMEs is essential to achieve the goals, including the creation of additional jobs, poverty reduction and inclusive economic growth. MSMEs are particularly important for poverty reduction, especially in rural areas and among women and other socially disadvantaged groups. Due to their role and place in national economies, MSMEs were taking the lead in helping to achieve most of the economy-related SDGs, including the promotion of inclusive and sustainable economic growth, increasing employment opportunities and decent work, especially for the poor, promoting sustainable industrialization and innovation and creating a positive impetus for better quality of life, better education and good health for everyone.

The recently announced budget for 2021-2022 did not bring any welcome news for MSMEs. It has been hailed by some as “business friendly”, but MSMEs have not received any tax relief or major financial incentives. Time and time again, experts have suggested that the Bangladesh Bank give financial institutions a boost to facilitate MSME borrowing. Currently, there is very little institutional coordination and no overall strategic vision or policy framework to support MSMEs. The productivity challenge for micro and small businesses is considerable. Data from the manufacturing sector suggests that micro and small businesses tend to have low value added per worker and low average wages; the average labor productivity in micro and small manufacturing industries is barely higher than the low productivity of the agricultural sector.

Going forward, the government is borrowing $ 250 billion from the World Bank for job creation programs. This loan is expected to help informal micro-entrepreneurs to recover by expanding micro-finance facilities. In the 2021-2022 budget, it should be noted that the applicable duties have been increased on the import of certain finished products to protect small and medium-sized industries while gaining duty-free access for some of the imports of raw materials from the endangered conch industry. But initiatives in favor of SMEs do not meet and do not correspond to expectations.

Let me end this note with a word of wisdom from MIT Professor Susanne Berger, who studies small and medium-sized businesses and their role in the supply chain. She recently wrote that governments need to bolster “countless small and medium-sized businesses you’ve never heard of” rather than paying big business money during a crisis. To Bangladeshis, the tone of this homily must sound familiar and welcome.

Dr Abdullah Shibli is an economist, currently a senior researcher at the International Institute for Sustainable Development (ISDI), a think tank based in Boston, United States.

Source link

Leave a Reply

Your email address will not be published.