Political unpredictability, skyrocketing inflation and rising bank loan interest rates are all contributing to the severe financial hardship that small and medium-sized businesses (SMEs) in Bangladesh are experiencing. Many entrepreneurs are resorting to delayed salary payments and employee layoffs as a result of sharp drops in sales and profitability.
As customers’ spending power continues to decline, business owners across a range of industries have expressed difficulty in continuing their operations. Due mostly to rising food prices, the inflation rate has been above 9 per cent since March 2023 and peaked at 10.87 per cent in October. The Bangladesh Bank has gradually increased the policy rate to 10 per cent in reaction to this unrelenting inflation, which has increased the cost of borrowing for SMEs.
Industry experts claim that small businesses are under tremendous strain as a result of the combined effects of growing raw material costs, higher loan interest rates and decreased sales. A vicious circle of financial difficulty is resulting from the growing inability of many enterprises to fulfil their financial commitments, such as loan installments and on-time payroll payments.
Many businesses have been compelled to use their savings or look for unofficial loans in order to stay afloat as a result of the drop in sales. Some companies have been forced to reduce their workforces, which has made unemployment in an already troubled economy even worse. As businesses reduce operations, seasonal workers—who usually find work during periods of high commercial activity—are also having difficulties.
Economic commentators caution that the wider economic recovery may be in jeopardy if the government does not take particular action to assist SMEs. In order to create an atmosphere that is favourable for growth and sustainability, they recommend that the appropriate ministries take proactive steps to address the problems that small enterprises face.
According to statistics, SMEs made up around 25 per cent of Bangladesh’s GDP in 2018, underscoring their vital significance in the country’s economy. There are almost 7.8 million SMEs in the nation and the current crisis not only puts individual companies at risk but also seriously jeopardises the stability of the economy as a whole.
Entrepreneurs express optimism for a recovery as the situation develops, but they also stress the critical need for assistance to get through these trying times.
