Supporting Hardest Hit Small Businesses in Bangladesh

July 13, 2020

Workers at Rezbin’s footwear factory

Rezbin Hafiz had to furlough 40 full-time workers when the government announced general holidays from March 26 to contain the spread of COVID-19 in Bangladesh. She is the owner of Peoples Footwear and Leather Goods, a small factory on the outskirts of Dhaka that makes shoes and accessories for the local market.

"Our buyers cancelled orders as their shops were shut down and they had no customers. But we had already bought raw materials and had finished goods, worth 2.7 taka million ($31,840). I had to pay my workers from my own pocket. I also used my prize money," says Rezbin, who won the National SME Entrepreneurs Award earlier this year.

Similarly, Sanjida Sultana, owner of Grandeur, a boutique in an upscale shopping mall in the Bangladeshi capital, had to use reserve funds to pay her six employees for two months. She also used her zakaat (religious tax) contributions to support 15 temporary workers who make her designer line, while cancelling orders for readymade outfits and raw materials from her Indian suppliers.

“With growing losses, I was left with no other option,” says Sanjida.

April and May would have been peak sales time for small businesses like Rezbin’s and Sanjida's due to the Bangla New Year and Eid-ul Fitr festivals. With rescinding orders and disrupted supply chains during the two-month lockdown, micro, small, and medium enterprises (MSMEs) were hardest hit.

Sanjida’s busy store before the pandemic hit

Small businesses contribute 25 percent to the country's GDP. Understanding the need for policy interventions, World Bank Group’s Bangladesh Investment Climate Fund (BICF II) supported the Bangladesh Investment Development Authority (BIDA) to solicit feedback from the private sector.

Keeping in mind social-distancing protocols, BIDA and IFC jointly organized a series of virtual dialogues on key impediments during the pandemic. In these video conferences, business representatives urged the government to reduce regulatory compliance requirements as they were already struggling to keep their companies afloat and risked getting labelled as “non-compliant” for delays in paying taxes and other fees.

Following the webinars, BIDA recommended several policies to the relevant implementing authorities to help reduce regulatory burdens on the private sector. Accordingly, the National Board of Revenue waived all penalties for delayed VAT return filings until June 9, which has greatly benefited smaller businesses.

Furthermore, the government relaxed other regulatory requirements, including waiving storage demurrage fees for importers’ containers at Chittagong port. This is helping small businesses; they don’t have pay charges for failing to discharge their goods within the agreed time.

The two Bangladeshi entrepreneurs have partially reopened their businesses. Half the workers at Peoples Footwear are now busy with new corporate orders, including making 6,000 shoes for prison guards. Grandeur is open half a day and offering clearance sales.

Rezbin and Sanjida know how difficult it is to operate fully following social-distancing guidelines in limited floor space. They are determined and putting in the effort to accept the new normal in order to sustain their businesses and support their families during these uncertain times.