Southeast University

A report on “Impact of COVID-19 on Small and Medium Enterprises (SMEs) in

Bangladesh”

Course Title: Financial Markets and Institutions

Course Code: FIN634
Semester: Summer 2020
Section: A

Program: Masters of Business Administration

Submitted By Submitted To
Md.Abdul Hai Ms. Syeda Tanjila Shahnewaz
ID:2019210004103 Lecturer
Major: Finance Southeast Business School
MBA(FIN &Banking) IIUC
Southeast university.

Date of submission 25.08.2020

 (i)

Table of Contents
No. Contents Pages
Chapter :01 Introduction Part 1-1
1.1 Introduction 1-1
1.2 Methodology of the study 1.1
1.3 Literature Review
Chapter : 02 Analysis & Discussion 1-3

2.1 Analysis & Discussion 1-3

Chapter :03 Findings, Recommendation, Conclusion 3-3

3.1 Findings 3-3

3.2 recommendation 3-3
3.3 Conclusion 3-3

(ii)
1.1 INTRODUCTION

The impact of global COVID-19 pandemic, both in health and economic terms is
becoming clearer. This article critically explores the challenges in implementing remote
working practices in small and medium enterprises (SMEs) and the solutions during the
COVID-19 pandemic lockdown in Bangladesh. Based on the qualitative approach,
interviewing 14 participants from SME owners, consultants, government officials and
professors, we found several challenges such as financial constraints, bureaucracy, lack
of knowledge and interest, communication problem, high employee turnover and
difficulty to find trustworthy employee implementing remote working practices. The study
also advanced some solutions such as convincing the benefits of remote working
practices, government rules, financial incentives, training and IT courses and remote
(online) classes in universities in implementing remote working practices in the SMEs
not only during COVID-19 pandemic but also for the long-term. These have several
implications regarding SMEs performances and workers benefits.

1.2 Methodology of the study

This study used a descriptive analysis method of primary and secondary data obtained
directly both survey and from various publication sources

1.3 Literature Review

A survey of scholarly sources (such as books, journal articles, and theses) related to a
specific topic or research question. It is often written as part of a thesis, dissertation, or
research paper, in order to situate your work in relation to existing knowledge.

2.1 Analysis & Discussion

There are several ways the corona virus pandemic affects the economy, especially
SMEs, on both the supply and demand sides. On the supply side, companies experience
a reduction in the supply of labor, as workers are unwell or need to look after children or
other dependents while schools are closed and movements of people are restricted.
Measures to contain the disease by lockdowns and quarantines lead to further and more
severe drops in capacity utilization.

According to the Asian Development Bank, the SMEs in Bangladesh account for 70 to
80% of the non-agricultural sector employment. 40% of the manufacturing output is also
by SMEs. Presently more than 6 million SMEs and micro-enterprises are operational in
Bangladesh and they are constantly striving to upgrade the lives of many. (RRP Sector
Assessment, ADB). 

Due to the current lockdown, the enterprises not related to emergency food and
medicine are suffering immensely. SMEs related to services and production of generic
items such as jute, handicrafts, light engineering among others have been hit the
hardest as they are unable to maintain liquidity and operational activities. According to
the survey, 68% SMEs reported that they will have to permanently shut down their
business if the lockdown persists for more than 4 months.

Covid-19 pandemic: 76% products of SMEs remain unsold

Since the Covid-19 pandemic has disrupted the supply chain, about 76% produced
goods of Small and Medium Enterprises (SMEs) valued at Tk6.75 lakh each, says a
survey.

Meanwhile, SME entrepreneurs in the rural areas are being hit the hardest due to the
impact of Covid-19, as their revenue has dropped by 67% in 2020 compared to the
previous year.

However, the average reduction of revenue for all SMEs is 66% in 2020 compared to
2019.

According to a survey titled “Covid-19 and SMEs: Understanding the Immediate Impact
and Coping Strategies” annual revenue reduced by 67% in 2020 compared to 2019,
which is 66% for all SMEs sectors.

Bangladesh Institute of Development Studies (BIDS) conducted the survey over 375
enterprises and 360 workers during April 26 to May 10, 2020. The report was unveiled
on Wednesday.

As per the survey findings of the surveyed entrepreneurs, 76% goods produced by the
entrepreneurs remain unsold and the value of unsold goods is Tk6.75 lakh each.

Economic activities were not completely shut down during the lockdown, while only 16%
of SMEs were open. However, it was 38.24% in cases of handicrafts and rural SMEs
were opened by 11.40%, the report showed.  

The average reduction of revenue for the all SMEs is 66% in 2020 compared to
2019

Since the Covid-19 pandemic has disrupted the supply chain, about 76% produced
goods of Small and Medium Enterprises (SMEs) valued at Tk6.75 lakh each, says a
survey.

Meanwhile, SME entrepreneurs in the rural areas are being hit the hardest due to the
impact of Covid-19, as their revenue has dropped by 67% in 2020 compared to the
previous year.

However, the average reduction of revenue for all SMEs is 66% in 2020 compared to
2019.
According to a survey titled “Covid-19 and SMEs: Understanding the Immediate Impact
and Coping Strategies” annual revenue reduced by 67% in 2020 compared to 2019,
which is 66% for all SMEs sectors.

Bangladesh Institute of Development Studies (BIDS) conducted the survey over 375
enterprises and 360 workers during April 26 to May 10, 2020. The report was unveiled
on Wednesday.

On the other hand, the owners claimed that 19.15% workers were paid partially, while
1.17% did not get payment. They also claimed that 79.15% workers were paid fully.

Nonpayment of wages was higher in the electrical, light engineering and plastic sector
by 9%.

3.1 Recommendation

“Prevention is better than cure” — is a quote familiar to most of us. To date, there is no
cure for COVID-19 and the only way left for us is prevention. The lockdown is mandatory
for our survival — with the current healthcare infrastructure it will be painstakingly
difficult for us to fight and win against this virus at a mass scale level.

We propose some concrete recommendations. SMEs create livelihoods and if they fail
we will go into deeper economic shock with more and more people coming below the
poverty line. Hence we all need to work together to support and uplift the sector. On the
off chance that there is one thing that COVID-19 has shown unmistakably is that interest
in digitization is not a luxury.

3.2 Findings

These study findings might assist in formulating the strategic decision focusing on SME's
revival and re growth after the pandemic become stable. Study findings also utterly
established the fact i.e. government should invest considerable effects for mobilization
and efficient reallocation of resources through collaboration of both Banks and nonbanks
financial instructions.

3.3 Conclusion

These are tough times and we all need to rally together. Government needs to take
quick actions to support food systems, albeit with limited information. There are many
priorities but if there is one strategic entry point where one investment can give multiple
returns in a relatively short time, I would argue that it is the investment in our food
systems through SMEs.