A staggering 37 percent of workers in Bangladesh’s micro, small, and medium enterprises (MSMEs) lost their jobs, either temporarily or permanently,in the space of one month, with 94 percent of MSMEs experiencing a sharp drop in sales due to the impact of COVID-19.
These are among the key findings of the COVID-19 Business Pulse Survey carried out in Bangladesh between June andAugust 2020 by IFC and the World Bank, in partnership withthe UK’s Foreign, Commonwealth and Development Office (FCDO).
The survey of over 500 MSMEs shows that 70 percent of all workers are now in vulnerable jobs, with businesses either temporarily closed or only partially open. Businesses had, on average, only enough cash to cover costs for just over 100 days. At 91 percent, Bangladesh’s businesses suffered the worst decline in cashflow, compared withsimilar economies such as Vietnam (66 percent) and Indonesia (69 percent).Thirty-seven percent of women-owned firms had temporarily shut down operations, compared with21 percent of firms owned by men.
“We are working hard to bring the economy back to its normal stage,” said Fazle Kabir, Governor of Bangladesh Bank. “I appreciate IFC’s efforts to generate these valuable insights into the MSMEsector. We are committed to implementing the stimulus packages and have instructed banks to provide loans to cottage, micro, small, and medium enterprises at subsidized interest rates.”
Overall, the survey shows more than 80 percent of businesses reported making losses in the monthpreceding the study. The situation was particularly dire for fashion and clothing businesses, with over a third having to close their doors because of the pandemic’s impacts. The average drop in sales for fashion and clothing businesses was 65 percent, compared with last year.
“Micro, small, and medium enterprises are key drivers of Bangladesh’s economy which account for about 25 percent of the GDP, and employs over 20 million people,” said Mercy Tembon, World Bank’s Country Director for Bangladesh and Bhutan. “The COVID-19 pandemic has hit small businesses and informal workers hardest with loss of income and jobs. Going forward, it will be important for Bangladesh to support the recovery of micro, small-medium enterprises, especially women-owned businesses and remove constraints to their access to credit.” The survey shows most businesses are expecting a negative impact on sales and jobs over the next six months. Seventy percent of micro firms were not optimistic about their future sales prospects.
“Even before the pandemic hit, these Bangladeshi businesses were already in a precarious position, as they operate on slim margins,” said Wendy Werner, IFC Country Manager for Bangladesh, Nepal and Bhutan. “The fact that these businesses are now in extreme distress highlights the urgent need to boost the resilience and capacity of these enterprises so they can ultimately preserve jobs and be on the road to recovery.”
In order to recover from this crisis, businesses identified cash transfers, access to new credit, and loans with subsidized interest rates as the top three most needed policy supports.
As a part of the COVID-19 response in Bangladesh, IFC has supported clients and financial institutions by investing$75 million in working capital. IFC’s advisory programs have also provided technical assistance torepurpose production lines to manufacturepersonal protective equipment and facilitated industry dialogues on diversification in manufacturing.
Globally, IFC has put in place a package of measures—worth a total of $8 billion—to help sustain economies and protect jobs around the world.
