Why these enterprises deserve genuine support to return to vibrant business
In Bangladesh, more than 6 million MSMEs provide 7.86 million jobs, livelihood to 31.2 million people, contribute to 75% to 80% of export earnings, about 25% to GDP and 45% of manufacturing value added. MSMEs are an important part of larger national and global value chains, particularly in Ready Made Garments, and their health has a bearing on supply chains overall and indeed the ability to supply the diverse consumer and capital goods and services we rely on in daily life.
MSMEs have been heavily impacted by the Covid-19 crisis, with different surveys indicating that more than two-third of MSMEs expects to close down their business within four-months leading to loss of employment and livelihoods for millions of workers. The prospects are undoubtedly dire, yet how dire only the future can tell. The pandemic and crisis are still with us, locked down or unlocked. The measures we take to contain spread of disease and mitigate its health and human impacts now and in coming months will have a lasting impact for many years to come.
According to Economic Census 2013, there are 137,888 manufacturing MSMEs and a further 727,233 cottage industries -- these are the prime focus for UNIDO. Feedback from MSMEs around the country revealed the complexities for recovery. The level of uncertainty in policy, regulations, trade and markets is unprecedented.
Demands for goods and services had plummeted overnight, in form of billion dollars’ worth of cancellation of export orders and through lockdown measures locally. The workforce was on the move with large scale return migration of significant sections of lower skilled categories. Standing idle for months during lockdown, inventories decayed and equipment degraded, whilst also supply chains have been disrupted.
All ingredients for a proverbial perfect storm that set out to run down overnight the already lean cash reserves typical to MSMEs. Most MSMEs need cash resources to replenish working capital to restart business. Any cash injection though will be short lived, and indeed markets and consumer demand need to be rebuilt urgently to restart the economic engine.
Covid-19 laid bare and exacerbated weaknesses that existed beforehand. Undoubtedly, MSMEs deserved accolades as key contributors to economy, trade, and income and employment generation. Overall, MSMEs though typically underperform in regard to productivity and quality, energy and environment, health and safety and conditions of work. The underlying causes are complex and interrelated, including government policy and regulations, deficiencies in MSME support eco-system regarding market requirements, technology, product design and innovation, shortfalls in entrepreneurial and manufacturing competencies and systems, and historic conditions, including legacy waste and pollution.
As a first step forward, MSMEs deserve to be treated with dignity and respect, and supported in their legitimate aspiration to grow their business. Bangladesh stands to benefit from more small businesses growing to become medium and indeed large. The recent allocation of Tk20,000 crore low interest loan facility to provide working capital loan to the micro, cottage, and small and medium enterprises is a praiseworthy step from Bangladesh government.
Successful implementation of this stimulus package will give a boost to these enterprises.
Contrary to common perception, crisis, as we currently experience, is appropriate time for change to ensure that we build back for a better future. There are ample opportunities, starting within the confines of MSMEs themselves.
UNIDO therefore put together an online knowledge and collaboration platform: Building Back MSME Business from Crisis (B3C) -- www.b3cmsme.org. The knowledge resource is structured along a five staged roadmap to restart, recover and revitalize MSME business. This is complemented with practical suggestions to improve key areas of business performance, such as operations, manpower, health and safety, entrepreneurship, financing and supply chains.
Practical tutorials are complemented with how to guidance documents and checklists. A similar platform adapted to Bangladesh context can be a useful tool to support MSMEs during this crisis and beyond.
We observe everywhere that our daily lives have already changed. Digital or digital enabled solutions are helping the Covid-19 health and humanitarian response, with drones tracking disease and dispatching delivery, online learning and work from home, as just a few of many examples.
Further change towards a new normal is widely foreseen -- a future that may be characterized by greater circularity, more digitization, and enhanced resilience. As we move forward out of crisis, let us stay with our compass to a sustainable, inclusive and resilient world, as all nations had agreed in 2015 with the Sustainable Development Goals. MSMEs are enablers thereto and deserve genuine support to return to vibrant business.
René Van Berkel is Representative of the United Nations Industrial Development Organization, Regional Office in India. Zaki Uz Zaman is Country Representative of the United Nations Industrial Development Organization, Country Office in Bangladesh.