COVID-19 fallouts are making survival difficult for SMEs. It’s not that things are much different for the bigger players but if industry insiders are to be believed,large garment factories are faring comparatively better when it comes to getting orders owing to their better coping mechanisms stemming from their large production facilities and also the fact that they are able to access financial aid from the Government’s stimulus package, which places them in a little better position as compared to the smaller players.
Even as the Managing Director of APT Sweater Ltd, a small garment exporter based in Kamarpara area in Dhaka, Naim Bazlul Karim, said he faced a significant loss as his factory was closed for three months from April to June while during this period, he did not even get the subcontracting orders from large factories as the bigger industrial units were also suffering from shortage of orders from the global retailers.
“I have been trying to get back more work orders from my buyers,”reportedly said Karim, who employs around 150 workers and has terminated none of them despite the closure of the factory for three months.
Meanwhile, speaking to the media, BGMEA President, Dr. Rubana Huq said the SMEs were the worst-affected when it comes to managing finance and business since they worked for buyers having relatively smaller turnovers while also agreeing that when it came to a single policy serving both the big units and SMEs, there was a gap.
The existing situation of the readymade garment industry in Bangladesh is not unknown to anyone by now. Battered by the Coronavirus pandemic, many garment makers are struggling to keep afloat and the situation is even worse for the small and medium-sized players — cottage, micro, small and medium enterprises, are considered the backbone of the economy — even as reports suggest that most of the smaller players are struggling to revive and get their business going after having remained closed for a long time due to the countrywide lockdown announced by the Government last year and also owing to the shortage of funds, while the highest number of job loss also reportedly took place in this sector.
Meanwhile, the dearth of work orders for the small and medium-sized garment factories have become so acute that many entrepreneurs are reportedly looking for buyers to sell their units and exit the business for good even as the pandemic has brought the SME garment units to their knees.
According to Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Director Rezwan Selim, who cited the trade body’s data, around 300 SME units which are also members of the BGMEA had to shut down during the pandemic last year even as 20 of them, have reportedly managed to reopen and some are struggling to resurrect their business as they did not receive work orders and were not even able to manage the required funds.
The flow of work orders is not good even for the big factories, Rezwan underlined while adding that a majority of the factories, particularly the SMEs, are running at 40 to 50 per cent capacity while also explaining that since the inflow of orders in big units are also on the lower side, SMEs are not getting the associated subcontracting orders.
What perhaps made things even more critical for the small and medium-sized players is their inability to qualify for the soft loan from the Government-sponsored stimulus fund because of stringent conditions,which otherwise could have helped to infuse the much-needed fresh breath of life to the businesses even as the Senior Vice-President of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), Mohammad Hatem said that apparel exporters faced harassment in availing stimulus loans because of stringent conditions and bureaucratic tangles.
Some 70 per cent of the stimulus money was taken by the big units, stated the President of the SME Owners Association of Bangladesh,Ali Zaman, who further went on to add that at least 80 per cent of CMSMEs were affected because of the pandemic and almost all CMSMEs were closed for at least three months between April and July even when the big industrial units were not closed during the period.
Zaman blamed the stringent banking conditions, which he said made it difficult for most CMSMEs to receive the loan from the stimulus package whilst the entrepreneurs requested the Government to come up with a flexible policy so that all factories, especially the SMEs, can benefit from the stimulus package even as reports underlined how the spate of order cancellations and discount demand made lives more difficult for the small garment makers.
“Orders worth US$2 million were stuck and finally I had to agree to settle it at a 15 per cent discount,” explained Managing Director of Base Fashion, Md Ehterab Hossain, adding, “I am struggling to keep my business afloat as the number of orders has plunged.”
Therefore, they require different policy measures to survive in this crisis period, reportedly maintained the BGMEA President adding that the Government has provided an additional working capital scheme for the SMEs during the pandemic but agreed the working capital loan support was difficult to access as far as readymade garment factories are concerned because of the stringent processes requiring due diligence.
Another factor is the nature of business and the modality of financial assistance required for the RMG enterprises which differ from any other sector, she stated, adding, “For the immediate term, special assistance to SMEs with regard to accessing finance to turn around would be critical for continuing the growth journey of the industry and economy at large.”
Meanwhile, speaking to the media, a Gazipur-based garment factory owner who used to export garment items worth nearly Taka 70 crore annually and pay around Taka 1.70 crore in wages to his workers every month, on the condition of anonymity, reportedly stated that he could not qualify for the soft loan from the Government-sponsored stimulus fund because of stringent conditions. And owing around Taka 70 crore to banks, which he could not repay from his income from the garment manufacturing business, had to decide to do away with the manufacturing unit itself.
“I have to sell my factory and the land to repay the bank loans; the repayment of the bank loan would be the end of my 18 years of business life,” reportedly lamented the concerned garment manufacturer even as speaking to the media, Research Director of the Centre for Policy Dialogue (CPD) Khondaker Golam Moazzem said the Government needs to ensure that the small and medium-sized units receive soft loans from the stimulus packages while their loan repayment period should also be extended.
According to the President of the Bangladesh Garment Buying House Association, KI Hossain, most of the SMEs were dependent on subcontracting, which was not available on the expected lines due to inflow of fewer orders from the global brands and retailers.
Hence, going by the inputs and facts and figures shared by the stakeholders, it goes without saying that the small and medium-level players are undoubtedly going through some real tough times and if the situation does not improve soon, many more such players (small and medium-sized) may have to bow out of the business for good,which as one would agree, will not be good news for the Bangladesh RMG industry and in the interest of those who depend on it for their livelihoods or even the ones who count on Bangladesh for their sourcing requirements.