Sunday, August 9, 2020

Pandemic pushes small businesses to the brink

Business Desk :
Sarwar Hossain, a barber at Evergreen Gents Parlour and Salon in Dhaka's Shewrapara, used to bag around Tk 1,200-1,500 a day before the onset of the coronavirus pandemic. But now he is struggling to make ends meet as his daily earnings have plunged to Tk 300-400.
"I am in a lot of trouble. I cannot even pay the house rent with what I am earning right now. I have a boy who is studying in class seven and there are costs associated with his education. I also have a little girl. How can I support a family of four like this?"
People no longer frequent salons for haircuts, shaves or facials, Sarwar said. "Everyone is scared. There used to be four of us (barbers). Now I work alone because of a lack of customers," he said.
"We don't get a monthly salary. Our income revolves around individual customers. For every Tk 100 worth of work, we get paid Tk 40 and the rest goes to the owner of the salon. But we get to keep the tips."
Ripon Pal, owner of Jagannath Varieties Store in Shewrapara Bazar, is in a similar predicament, reports bdnews24.com.
"It's not like how it used to be. Many months have gone by and the coronavirus is still here. People have no work. How can they purchase things when there is no income?"
His business is now reeling from the coronavirus scourge.
"I used to sell Tk 25,000 to Tk 30,000 worth of goods every day before the pandemic. Now, I cannot even make Tk 10,000. I have to pay Tk 500 as shop rent every day. How can I continue to operate in this manner?"
Garment factory workers made up the lion's share of customers in the area, said Ripon. But most of them have now returned to their village homes as the pandemic forced many factories to shut down production. Many people from other professions have also left the city due to job losses.
The pandemic has devastated Bangladesh's economy and many small businesses are now struggling to find their feet. Although remittances, exports and imports have started to rise, domestic trade is yet to regain lost ground.
Five months into the pandemic, owners of micro, small and medium businesses are scrambling to stay afloat.
Helal Uddin, president of Bangladesh Shop Owners Association, told the news agency that businesses could not turn any profit during Pahela Baishakh or Bangla New Year, typically one of the most profitable times of the year, because of the pandemic. Almost everything was shut during Eid-ul-Fitr holidays. During the Eid-ul-Azha holiday, businesses did not even make 10 per cent of last year's profit, according to him. "This is a really bad situation. Six million small businessmen in the country, who used to run various types of businesses, each with a Tk 15,000-20,000 capital have now spent that money. They are now grappling with poverty and living in inhumane conditions with their families."
At the same time, sales at grocery stores, small businesses set up at various areas and 5.7 million markets across the country have also come to a standstill, said Helal.
"The 10 million employees working in these businesses and their families face the greatest danger. Despite repeated requests from the shop owners' association to the government, nothing has been done for this huge population."
They have not received a single penny from the incentive package announced by the government to compensate for the damage caused by the pandemic, he added.
"We had requested the government to provide one-year bank loans to small traders and employees who have lost their jobs due to closure of markets and shops. But nothing was done."
Banks are busy with industrialists who are not paying back the loans, he said.
Helal called on the government to act with compassion for the helpless traders and not just focus on big businessmen.
"I want to make it clear that the wheels of the economy will not turn unless micro, small and medium businesses make a comeback. So, these businesses need to be kept alive. We have to encourage them and stand beside them."
Economic researcher Ahsan H Mansur also echoed Helal Uddin's views.
"We need to ensure a major chunk of the money from the government's incentive package goes to micro, small and medium enterprises. Big businessmen operate a number of businesses and the losses from one particular business can be compensated by the profits from another venture."
During the last four or five months, these small and medium businessmen have used up their working capital to cover family expenses, said Ahsan. They cannot bounce back now without assistance from the government.
"The first thing we need to do now is to ensure that incomes are raised. We need to make arrangements for an increase in internal demand and the purchasing power of the people."
"A large part of the country's 170 million people have lost everything during the pandemic and have become poor. They need to be supported and we have to make arrangements to secure their incomes. Otherwise, our economy will not turn around."
Helal Uddin also highlighted the plight of shop employees and their families as a result of the crisis.
"Let's assume that the shop owners are running their households with the profit they earned from their long time businesses. But what will happen to their 12 million staffers and their 18 million or so family members? In total, about 30 million people will then starve. They'll live inhumane conditions due to the lack of jobs."

A study by Bangladesh Institute of Development Studies or BIDS found that the pandemic has brought at least 16.4 million people below the poverty line this year. The situation will improve a little when people's incomes return to the expected level in the third and final quarter of the fiscal year. Despite that, the poverty rate is likely to cross 25 per cent.

The study, 'Poverty in the time of corona: short term effects of economic slowdown and policy response through social protection' was headed by Binayak Sen, research director of BIDS. It was published on Jun 25.

At the start of 2020, the poverty rate was 20.3 per cent in the country, including 15.8 per cent in the urban areas and 22 per cent in the rural areas, according to the study. The poverty rate is likely to rise to 24.23 per cent in the rural areas and 27.52 per cent by the end of this year. Severe poverty is likely to rise to 14.9 per cent, which was 10.1 percent at the beginning of the year.

Those who were already poor before the coronavirus pandemic hit, are in a terrible state. Increasing the allocation for the social security sector won't be enough to redress the issue, according to Binayak.

"This is because the wrong people are selected as recipients of the allowances and assistance. Most of those who really need it don't make the list."

"Poverty reduction solely depends on how quickly the income is transferred to the poor. The government has to transfer it quickly and skillfully. Otherwise, it'll be hard to bring changes to the lives of the poor," the BIDS researcher said.