Women Entrepreneurs have been playing a significant role in accelerating economic growth in Bangladesh by creating employment opportunities, reducing poverty, generating economic activities in scores of areas. Though women participation in labour force is only 33 per cent as against male participation of 82 per cent, the role of women in the country's economic activities is vibrant. However, access to finance remains a big concern for women entrepreneurs in general, particularly at a time when they are fraught with extreme adversities due to Covid-19.
The impacts of Novel Corona Virus (Covid-19) are felt across the globe including Bangladesh over the last few months. The situation is getting worse day by day. Life, livelihood and economy are at risk and uncertain. Many women entrepreneurs are now scared to continue their businesses. They are going through different transitions and facing threats and challenges due to the pandemic. Many of them do not have sufficient liquid assets. They are unable to pay their employees in a situation of partial or total shutdown for the last couple of months. They have no savings to survive during the crisis phase. The pandemic has forced them to totally shutter or drastically scale down business operations. In addition, they have missed business opportunities on the occasion of Bengali New Year-- Baishakh and the upcoming Eid festival which account for around 40 per cent of their total annual turnover. Most of the entrepreneurs had already invested their capital for Baishakh and Eid festivities. It is now uncertain when they will get back to business as usual situation and get return from their investments.
Small women entrepreneurs are the real victims of the crisis. Most of them are not capable to sustain under the existing situation if Covid-19 induced crisis continues for another couple of months. Many small entrepreneurs would be forced to close their business soon finding no other alternative. They would lose their rent-paying power, utility bills and wages.
Access to finance is a big concern for the women entrepreneurs for long. In order to facilitate and motivate women entrepreneurs, the Government of Bangladesh along with the help of Bangladesh Bank has introduced different policies, programmes and initiatives. Bangladesh Bank also provided the guideline for banks and non-bank financial institutions (NBFIs) for extending the credit facility to women entrepreneurs. Women entrepreneurs are supposed to receive at least 15 per cent of all credit within the SME sector. Despite this initiative, most women entrepreneurs are facing difficulties to get credit from the banks and other NBFIs. The key barriers of the women entrepreneurs are related to collateral requirements and guarantee, trade licence and rigidity of loan procedures, and last but not the least, mindset of the bankers toward women entrepreneurs.
According to Bangladesh Bank, the maximum loan facility of 2.5 million taka will be provided against personal guarantee. And no collateral is required up to this amount and also the interest rate is 9 per cent. It becomes difficult to find the guarantors for new entrepreneurs. As most of the people in Bangladesh are risk-averse, most of the time they are reluctant to become guarantor of any kind of risk-taking activities. Moreover, most of the women start their own business either with their savings or with the help of family members. It is difficult for them to arrange enough assets to pledge as collateral in bank. As a result, banks cannot lend funds to the women entrepreneurs due to lack of guarantors and sufficient collateral. Besides, banks and NBFIs have doubts on the capacity, intelligence and skills of women entrepreneurs. Bank's scepticism towards female customers results in delay of loan disbursements, leads them to ask for more documents. Women chambers and SME Foundation may act as guarantor or provide the facilities to find suitable guarantors as and when required by the women entrepreneurs. Arranging documents is also a big concern for business. Therefore, women chambers may assist the female entrepreneurs in documentation.
The government has declared a stimulus package of Tk 200.0 billion for small and medium enterprises at subsidised interest of 4 per cent with 5 per cent government subsidy as working capital loan. It is not clear how much money is allocated for the women-led SMEs. How the money will be distributed and what would be the mechanism to select the entrepreneurs. It will most likely depend on the bank-client relationship. What will happen to the small women entrepreneurs who are the real victims of the pandemic without good bank transaction track records?
Due to the pandemic, most of the women entrepreneurs need money for their survival. It is uncertain when they would be able to restart their business. The government should provide some fund to support women entrepreneurs during Covid-19 pandemic period in addition to working capital. Besides, they should be given VAT exemption on sales for the remaining period of the financial year and also for the next year. The government is providing VAT exemption under the current 2019-20 budget on the rent of a business showroom run by women entrepreneurs. We hope this will continue too.
In 2018-19 budget, the government allocated Tk. 1.0 billion for Women Entrepreneurship Fund and Tk. 25 million for Women Development Special Fund for the advancement of women. No such allocation was made in 2019-20. However, a significant portion of this fund has remained unutilised due mainly to three reasons: (a) weak coordination between the agencies that work with women entrepreneurs; (b) incapacity of the potential women entrepreneurs to develop innovative yet feasible projects as per the guidelines set by relevant agencies; and finally (c) the complex process of application for the funds making the potential entrepreneurs unwilling to apply.
It is true that many women aspiring entrepreneurs lack skills and training necessary for efficient use of business funds. Women entrepreneurs require entrepreneurship development training, especially in the use of information technology for advancement of enterprises in the current competitive business environment. Women entrepreneurs themselves need to shift the gear as well by participating in training, workshops to enhance their capacity. Women chambers, SME Foundation, Directorate of Women Affairs can act as positive catalysts for desired women entrepreneurship development.
In the upcoming budget, government should allocate special fund for women entrepreneurs under the Covid-19 pandemic situation. There should be a road map with a clear framework for allocation of money for women entrepreneurs. It is thus important to note that despite the allocation of budget money for women entrepreneurship development, absence of clear guidelines across relevant government agencies for spending the money causes underutilisation.
It is hoped that the crisis due to the pandemic would end soon and the economy of Bangladesh would kick start with the collaborative efforts of the government, NGOs, private sector and development partners.
Dalia Rahman is a Research Fellow, Research and Policy Integration for Development (RAPID) and Chairperson of Agroho, a Non-Profit Organisation in Bangladesh working for the poor.
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