Page 76 - IBT December 2020

Coronavirus and Small and medium
economics of small
trading
Jamshed, a roadside vendor
selling snacks beside the
Shaheed Minar of capital
Dhaka has resorted to
rickshaw pulling. Before the
pandemic, his business was in
full boom, selling snacks up to
about BDT1000 a day. His
business especially got busy in
the evening when numerous
bystanders and visitors
gathered around his little cart
for buying snacks. It was his
only source of income; his
family and two school going
kids depending on it. Now
since the pandemic has
created an abhorrence of
roadside foods among general
people, Jamshed had no other
way other than closing his
shop. This is not the only
example. Many small traders
also had to close down their
main income source due to
government-imposed
lockdown. It was for the
greater good, understandably.
But now since most of the
stalled economic activities are
coming back to life, Jamshed
and many like him are finding
it hard to reopen their
businesses.
Capital is the main problem.
For several months there has
been little or no income for
small traders. By mid-April,
small traders were losing
about one thousand crore a
day due to low or no-sells. No
customer was there to buy
their goods. But food,
accommodation, and
household bills don’t come free
so they had to resort to their
savings. Now several months
of income deprivation means
these cash-starved traders are
unable to reopen their
businesses. They need loans or
any sort of financial help to do
so. But this economic
incentive seems to be absent.
Small traders not only work as
individuals but in many cases,
74
national identity cards and
enterprises and traders guarantors.
Recently IFIC bank went into an
employ about twenty agreement with the Bangladesh
million people and Shop Owners Association to
their GDP share in provide collateral-free loans of up
to fifty thousand takas to small
Bangladesh economy traders. But the authorities of
stands at 25%. So far, Bangladesh Bank took swift
various estimates action against it by banning this
process. Now easy cash incentives
suggest this sector lost are almost absent for small
around 92 thousand traders. To procure a trade license
crore due to the in Bangladesh one has to spend
around BDT8000. Now a small
pandemic. trader who sells his product in
van or portable stores, can’t amass
this amount of money quite
there are one or two helping reasonably. He is already in
hands. Due to the pandemic, desperate need of money, living
about one-third of them are now from handouts, or the trickling
jobless and more than 70% are in income he or she might still have
vulnerable situations. from various sources. A small
Complexities with trade licenses amount of BDT15000 to BDT
and the new instruction of the 30000 might do the trick for him.
Bangladesh Bank to not provide a But it is reasonably very hard for
loan without it has made business him to provide BDT 8000 to get a
recovery far more difficult. little loan of that amount. Also, a
tax return has to be submitted
The problem with loan per month if one is doing business
and cash with a license. Unable to do that
In Bangladesh, to get a loan from will instigate a fine of BDT
banks one has to have a trade 10,000.
license. But the problem is, That’s why the trade owners
because of bureaucratic hassle association and other bodies are
and complex procedures, a large demanding collateral-free loans
part of small traders don’t have given against documents like an
this document. They have been ID card and guarantors. There
doing business like this for years. have been additional demands
Now since they are desperately in asking for an exemption from VAT
need of cash, the small traders up to the mark of BDT50 lakh
association is demanding annual turnover. In this way, the
collateral-free loans against government can help these large
numbers of traders to start their
business again. It will be easy for
them to repay the money too. It’s
difficult and in many cases nearly
impossible for these traders to
arrange the necessary money for
procuring a trade license or do
other formalities regarding it.
Many are not even familiar with
the process of getting one. A
simple, efficient micro-loan
program can help this section a
lot. It will also be a great incentive
for boosting the lagging economic
activities of the country.
Government packages
and loans
The government of Bangladesh
did not sit idle during the
pandemic. Micro, Small, and
Medium Industries (MSMEs) play
a crucial role in the economy. So
when the COVID-19 impact was
affecting them negatively, the
government provided a stimulus
package of BDT20,000 crore.
There were also initiatives like
One-Stop Service (OSS) and Single
Window Services to ease the
business procedures. However,
very little has been done
specifically targeting small traders
who also fall under the MSME
category. Large-scale aid programs
have indeed been directed towards
poor and low-income people but
aid is certainly not the permanent
solution.
applied for it. At least 10% found
the process of applying for
financial help to be difficult
while 5% of the surveyed
enterprises don’t fit in the
qualification criteria. Another
10% had different issues
regarding these packages.
Recently, Bangladesh Bank
issued instructions to provide
loans against guarantors only.
Shop owners also think
collateral free loans can be the
solution. So they welcome
government decisions regarding
it. But the catch is, all small
traders don’t possess trade
licenses. So they fear many will
miss the opportunity. However,
it’s not all the government’s
fault or lack of goodwill. The
banking sector of the country is
already under pressure as they
Another problem lies regarding are instructed to go easy for
the reach of government
installment payments from big
incentives. There are at leas businesses. Huge loans have
1,04,007 micro-level and 8,59,318
been given out to large business
small level enterprises in the companies, specially those of
country. Many of these are trading
the RMG sector for enabling
enterprises. According to a report swift recovery. Specialists warn
published by IMF titled,’ Business
that in near future, banks will
Pulse Survey: Impact of COVID-19 find it difficult to bring back
on MSMEs in Bangladesh”, the
these payments. Moreover, it’s
percentage of MSME’s who have even harder to get back small
received government financial
amounts of money lent to
assistance stands at 0.4%. 61% of traders. This might be a reason
the rest didn’t even know about
behind the reluctance to provide
these packages while 14% didn’t a loan without a trading license.
receive any though they have
Small and medium enterprises
and traders employ about
twenty million people and their
GDP share in Bangladesh
economy stands at 25%. So far,
various estimates suggest this
sector lost around 92 thousand
crore due to the pandemic. While
many are recovering through
their efforts, a large section is
lagging. Hence many small
traders are asking for quick,
hassle-free loans given to them
based on ID and guarantor.
Retrieving the loan back might
be a problem, true, but there is a
good chance that traders are
asking for something which
might be very reasonable, given
the pandemic and uncertain
economic activities.