Hiren Pandit
The income of 83.90 per cent of the small entrepreneurs in the country has decreased due to the impact of Covid-19. 40 per cent of employees have lost jobs in small enterprises. 22 per cent of small entrepreneurs could not repay the loan instalments regularly. 5 and a half par cent did not get loans as per demand. 21.3 per cent of entrepreneurs have faced adverse conditions in terms of living conditions due to an increase in commodity prices. 47 per cent of entrepreneurs broke savings to overcome financial losses. 21 per cent of entrepreneurs have sold their assets.
These data have come out in a research report titled ‘Effect of Covid-19 on Microfinance Customers of Bangladesh’ regarding the impact on microfinance activities due to corona infection. The study was conducted by the International Network of Alternative Financing Institutions (INAFI) Bangladesh, an organization of microfinance institutions. The report was released at a function organized by INAFI recently. The report has been prepared by surveying the people involved in this sector for two years. About 74 per cent of entrepreneurs in the country are running their businesses with loans from microfinance institutions.
About three and a half crore people in the country take services in the microfinance sector. The contribution of this sector to the GDP is about 15 per cent. It is said that if the country’s economy is to turn around from such a situation, the government’s policy support needs to be increased. According to the report, in the post-Covid-19 situation, 53.23 per cent of the small entrepreneurs in the country are surviving by taking loans, 47.58 per cent by cutting costs, and 21.77 per cent by mortgaging their assets. Now the emphasis is on increasing policies to bring them back to normal because a large part of the rural economy is small entrepreneurs.
They cannot be neglected in any way. The study was prepared by collecting data from 442 micro-loan beneficiaries and 22 micro-loan service providers in nine districts. Data has been collected from them from December 2021 to February this year. The use of digital financial services has increased during the Corona period, the study added. 2.5 per cent of borrowers used this service before Corona, but after corona, it increased to 13.3 per cent. Only 38.5 per cent do not know how to use a digital wallet.
All of us are facing tough challenges in the time of Corona. We are calculating now, what we have gained and what we have lost during this time. While most activities have come to a standstill, we have some gains. Especially e-commerce and the f-commerce concept have got a new dimension. But women entrepreneurs’ access to finance especially credit remains more or less the same.
To understand the issue of women entrepreneurs’ access to the financial sector, it is also important to understand whether she has rights and control over wealth and money. This matter is being discussed very seriously all over the world, especially in Bangladesh. An adult woman has to present a male guarantor if she wants to take a formal loan. Why must appear? The principle of this is that in most cases there is no wealth in the name of women, no land in the name of women, and no house in the name of women.
So how can a woman accumulate wealth and withdraw money to start a new business? It has been said for a long time that the number of women entrepreneurs across the country is constantly increasing. However, we do not have any official statistics on how many people are involved in small, medium and entrepreneurs, and we do not have any official statistics on the percentage of women. In the absence of statistics, we do not know what percentage of women entrepreneurs have been lost or are about to be lost due to the impact of Covid.
Covid has affected 85 per cent of small entrepreneurs. This impact on small entrepreneurs in a country like Bangladesh is a big blow to the country and its economy. 80 per cent of micro-entrepreneurs in the informal sector say their income has decreased. Women entrepreneurs are the most vulnerable of this group. We need to think about short, medium and long-term strategies to overcome the economic disaster caused by the pandemic. We have shown women, and entrepreneurs, how to adapt to such situations. Some skill development is required here.
The policy of access to finance for women entrepreneurs is very useful in some cases but there are challenges in its implementation. There are many challenges in this field-level credit disbursement space. The main objective was to develop the skills of women entrepreneurs and connect them with a long-term sustainable income. We have to look at the problem from the economic point of view as well as from the social point of view. Because the most affected group in Bangladesh is socially backward.
The CMSME (cottage, micro, small, medium enterprise) sector contributes about 25 per cent to Bangladesh’s GDP. There are about 8 million businesses in Bangladesh and 9.93 per cent of them are CMSMEs. And 7.2 per cent of them are managed by women. Talking to women entrepreneurs, we mainly brought forward three challenges, the banking process of loan taking and repayment, the support sought by the informal sector and what kind of help or expertise they expect in the current era of e-commerce and f-commerce.
Interest rates on loans are very high for women entrepreneurs. The repayment period after taking the loan is very short. Many entrepreneurs also talk about the complicated process of getting loans. Loan conditions are largely unsuited to women entrepreneurs. Because, some women entrepreneurs can be brought under the social safety net to take loans, are in a very adverse situation after the Covid-19 pandemic. Small cottage industries CMSME women need insurance facilities.
Recommend interest-free loans under the stimulus package. Many women are in no position to take a loan. In that case, a small portion of the incentive package may be in grants. Women don’t have information, it’s very true. Knowledge of financial matters is most important in this field. Banks require a lot of information. Many small entrepreneurs are intimidated by filling out so much information. It is said that 76 or 77 per cent of the 20 thousand crore taka incentive package of the SME sector has been distributed in the last financial year.
However, there is great doubt as to how much CMSE has received out of this. But whether small entrepreneurs got more than 20 per cent, there is a doubt that medium entrepreneurs have been given more. Women got 5.41 per cent. There is a circular from Bangladesh Bank, up to 25 lakh taka should be given to women entrepreneurs without collateral. Although there are guidelines, they are not being properly implemented.
BSCIC has been working with small entrepreneurs since its inception. BSCIC is working on e-commerce and e-marketing now. Women and small entrepreneurs should be empowered and introduced to modern training and technology. They should be financially self-sufficient and sustain the business. If we cannot create entrepreneurs, the developed Bangladesh we are talking about in 2041 will not be possible. Today’s small ones will one day become potential.
The amount of loan disbursement is not increasing much. For this to increase, banks and financial institutions must be more active because this initiative has been taken to encourage good entrepreneurs. But many people may not be able to start the loan facility due to a lack of necessary documents. But Bangladesh Bank has given special instructions for them to start this facility very soon.
Credit Guarantee Scheme Manual-2020 has been formulated for the disbursement of loans. In that light notification was issued on 13th April 2020. In 2000, our number of women entrepreneurs was 6 per cent. Now it is said to be 28 per cent but the number is higher. According to the 2013 statistics of the Bangladesh Bureau of Statistics (BBS), there are 0.78 or 0.79 million SME entrepreneurs in our country, including cottage and micro sectors. Now the number has crossed one crore. Some businesses have closed due to Corona. But still, we have at least 9 million CMSMEs.
It is necessary to simplify the regulations of Bangladesh Bank. Small entrepreneurs grow up once in a while. So, the government should continue to encourage the small ones. SMEs will flourish only with the support of the government. The steps taken by the Bangladesh government to deal with the financial loss of Corona are commendable. However, more attention should be paid to the CMSME sector to provide temporary employment to those who have lost their jobs due to the Corona pandemic.
It has been alleged that banks are not interested in providing collateral-free credit facilities to cottage, micro, small and medium enterprises (CMSME) entrepreneurs. Although the banks are claiming, they cannot give loans due to a lack of necessary documents. Bangladesh Bank has taken this decision to bring more customers under the guarantee scheme. Apart from this, the entrepreneurs of the refinancing scheme formed for marginal, landless farmers, low-income professionals, school banking account holders and small traders have also been brought under the credit guarantee scheme.
The writer is a columnist and researcher. He can be contacted at hiren.bnnrc@gmail.com