Home ›› 20 Nov 2021 ›› Editorial
CMSEs are considered as the backbone of any economy. No country has achieved sustainable economic growth and created jobs without promoting CMSEs. They are an integral part of the supply chains in the economic sector. According to pertinent observers the contribution of the sector to the national economy of Bangladesh is more than 25 per cent and it also employs more than eight million people. The cultural heritage of the country is also associated with their products. Unfortunately, the major victims of the Covid-19 outbreak in Bangladesh have been these cottage, micro, small, and medium-sized enterprises. This indeed is a matter of serious concern for Bangladesh, since these enterprises are strategically important for economic recovery of the country after the pandemic is over. Against this backdrop it indeed comes as a welcome news that the Asian Development Bank has approved $150 million in loans to provide a much-needed fillip to the sector. It must be remembered that the majority of these enterprises usually do not possess adequate liquid assets, nor do they enjoy necessary access to credit, even in normal times and the pandemic has only worsened the situation.
According to a report published in this newspaper on Friday, the loan to Bangladesh Bank, the nation’s central bank, will be on-lent to participating financial institutions (PFIs), which in turn will help 30,000 CMSEs operated by the beneficiaries. The report further states that this project builds on the $250 million policy-based Strengthening Social Resilience Program, approved by ADB in June 2021, to strengthen Bangladesh’s social protection programs and resilience of vulnerable groups. We appreciate ADB’s initiative.
Covid-19 has resulted in severe consequences on lives and livelihoods of hundreds of thousands of people and a definite setback on the economy of Bangladesh. According to experts due to the coronavirus pandemic, the revenue of CMSEs has decreased by 66 per cent and 76 per cent of the products have remained unsold. Many workers of this sector have received partial salaries, and some have not received any salary. Sales in micro and small enterprises have not recovered to pre-Covid levels, despite businesses reopening.
In response to the economic fallouts of the pandemic, the government and Bangladesh Bank took several polices for the CMSMEs that included stimulus package of Tk 200 billion working capital financing at 4.0 per cent interest rate, refinance scheme of Tk 100 billion against this working capital financing, credit guarantee scheme and start-up-fund apart from existing financing facilities. However, concentration of stimulus packages on the larger firms, and most importantly lack of a proper database of all categories of enterprises and slow recovery of the smaller firms meant less than expected benefit.
As is well known most of these enterprises are informal, that is, they are not registered with the government. Informality is prevalent in the private economy and especially among small firms. Some 90 per cent of microenterprises and 95.5 per cent of small enterprises are engaged in providing informal services for the domestic market. The average size of these firms is quite low both in urban and rural areas. This informal nature is hindering their growth. The productivity challenge for micro and small enterprises in Bangladesh is substantial as well. According to experts the micro and small enterprises tend to have low value-addition per worker.
While experts across the board agree that the sector is the backbone of the economy the actual support provided by authorities regarding nurturing the cottage, micro, small and medium enterprises leave a lot to be desired. Especially if we compare it with governments around the world, particularly those of China, India, the UK and the US. So, the ongoing pandemic has actually given the government an opportunity to get their act together in this regard. The government needs to take policy initiatives for resolving multiple issues facing the CMSME sector to create a favourable regulatory framework and increase their access to formal finance. It is also necessary to increase the capacity of the SME Foundation for the development of the sector.