Small businesses, which are seen as the lifeline of the economy, had hoped the government would take care of them to help them stay afloat when it announced a nationwide lockdown and a massive stimulus plan to protect the economy and the population from coronavirus disease in March last year.
The hiatus in economic activity that lasted two months until May brought a bitter experience for micro and small businesses, as most of them barely managed the financial support from the stimulus funds while their capital was running out.
They breathed a sigh of relief after the restriction was partially removed in June. Small entrepreneurs and businesses have resumed their activities by borrowing from relatives and other sources, with bankers reluctant to make the loans.
But small businesses’ dreams of making a turnaround on their own faded after the second wave hit the country, forcing the government to bring back strict restrictions on movement for a week from yesterday to keep the deadly flu from a distance.
The move prompted hundreds of small traders in Dhaka, Chattogram and Rajshahi to take to the streets because they believed the move would repeat the consequences they faced a year ago.
“I took to the streets as I felt cornered with losses since the last lockdown,” said Sayeed Akter Kajol, owner of a ready-to-wear store at the GDR market in Rajshahi town.
He invested around Tk 10 lakh for the shopping season before Eid-ul-Fitr. He usually invests Tk 2 lakh per month.
“The month of Ramadan is our peak season. I suffered huge losses during Ramadan last year due to the lockdown,” he said, adding that he had not yet recouped the losses. he suffered in April and May of last year.
Kajol said he had failed to manage any funds from the government’s stimulus funds.
He went to the banks for loans, but they asked him to provide collateral. “I don’t have enough real estate to handle the bank loans,” he said.
In Bangladesh, there are around 78 lakh of micro, small and medium enterprises (MSMEs). Most of them are micro and small traders. In total, SMEs contribute around 25 percent to the GDP.
But micro-enterprises have been left on their own to manage their recovery, although the government has announced stimulus packages for Tk 121,353 crore, or 4.3% of the country’s GDP.
The central bank has declared a stimulus fund of Tk 20,000 crore for small and medium enterprises. But banks have disbursed 65% of the fund as of March 18, according to central bank data.
The Bangladesh Bank initially asked the banks to disburse the fund by August 2020. But it was then forced to extend the deadline twice due to reluctance shown by lenders.
This could extend the deadline again, as the banks did not distribute the funds last month, which was the last deadline.
Another stimulus package, which was formed for disadvantaged and marginalized businesses, also saw poor implementation. Banks disbursed 52 percent of the Tk 3,000 crore fund through microfinance institutions in March.
“A good number of lenders provide loans to large borrowers, and they have little ability to disburse funds to micro and small businesses,” said Ahsan H Mansur, executive director of the Bangladesh Policy Research Institute.
“It is therefore difficult to solve the problem overnight. Some lenders are also reluctant to extend loans to the SME sector given the high cost of operation.”
He feared that unrest among small traders would fuel more if the restriction on movement was extended.
“The government should have crafted a number of tax measures before declaring the latest restrictions,” Mansur said.
The government has already hinted that the restriction could be extended beyond the initial week if the rise in infections is not brought under control.
The government did not take any preparation to meet the needs of small traders during the unusual period, said Mansur, also a former official of the International Monetary Fund.
Stimulus packages declared by the government are considered monetary measures because the central bank now provides the maximum amount of stimulus funds.
“Immediate fiscal measures must be taken. If the government does not do this, the pandemic and the unrest will intensify,” he said.
Roni Raj Hossain, owner of a restaurant in the city of Rajshahi, said he had invested around Tk 5 crore to establish and expand two restaurants and two schools over the past decade.
“My businesses are now facing uncertainty. I have to pay monthly installments for bank loans, employee salaries and other bills,” he said.
“I feel like I have committed a sin in becoming an entrepreneur. All my effort and ten-year investment will go astray. Death is better than another foreclosure.”
The businessmen of the city of Rajshahi are waving under the banner of “Babosayi Oikya Parishad”, an alliance of 110 companies of the divisional city.
Hundreds of small traders also staged a demonstration in the New Market district of Dhaka City to protest the restrictions.
Helal Uddin, president of the Bangladesh Store Owners Association, said the restrictions came at a time when store owners had started to recover from their previous losses from the previous lockdown.
“We want to keep the store open by maintaining health protocols as we make most of our annual profits during Eid festivals,” he said.
Countries in North America and Europe have recently provided cash aid to small traders so they can pay employee wages during the lockdown.
“But, taking such a move is difficult for our government. Yet the government should try to adopt such measures to some extent so that small traders do not face the debacle,” Mansur said.
Syed Mahbubur Rahman, chief executive of Mutual Trust Bank, said banks feared they could recover funds that had been disbursed under stimulus packages in recent months.
“Banks are now under pressure. It is difficult for them to implement new stimulus packages given the shape of their current financial health,” he said.
The government should extend the credit guarantee scheme from the current Tk 2,000 crore so that banks can lend to micro and small businesses without hesitation.
The government can grant tax cuts and an exemption on electricity bills as part of its tax measures, he added.