High inflation in Bangladesh causes sales declines for small businesses

According to entrepreneurs, Bangladeshi micro-, small- and medium enterprises (CMSMEs) are seeing significantly reduced sales at a moment when inflationary pressures have pushed up production prices.

According to them, consumers have been buying less products as a result of high costs for daily necessities, economic uncertainty, and especially Russia-Ukraine war.

A majority of CMSMEs also see a drop in profits as a result of higher transport and raw materials costs. They are forced to lay off employees for survival.

After the Russia-Ukraine war, Bangladesh has faced a serious macroeconomic crisis. The consumer price index reached an all-time high of 10 years in August.

CMSME owners report that sales fell by 40-50% in recent months, compared to the previous year.

Laboni Khan is the owner of a Manikganj-based fashion boutique. She said that her products were worth between Tk 2-3 lakh per month during 2019, just before the Covid-19 pandemic.

Khan saw her sales drop again in March, despite the fact that her business was slowly recovering from two years of loss due to pandemic-induced events.

Because production costs have increased, the profit margin has been reduced. “Earlier there were 20-25% profit, but it is now difficult to keep even 10% profit,” she stated, noting that survival is now the goal.

According to the entrepreneur, she uses her own money to run the business. Taking out loans from banks to get through the crisis might quickly prove to be another burden.

Fayjullah Sharder, Habib Industries Limited’s assistant manager of marketing and sales, stated that the company is more concerned with battling this crisis than earning profits.

It manufactures a wide range of packaging materials, such as PET preforms, pharmaceutical bottles, caps, and closures.

Sarder stated that workers could be laid off if conditions worsen.

“But you will soon see good days again if your market stays open,” he said.

This opinion was shared by over 25 CMSME entrepreneurs who attended the 10th National Small and Medium Enterprise Fair-2022 at Dhaka.

According to the Bangladesh Bureau of Statistics Economic Census 2013 there were 78.8 million business establishments.

They include cottage industries at 87.52 percent, micro industries at 1.33 percent, small industries at 10.99%, medium industries at 0.09%, large industries in 0.07%, and micro industries of 0.07%.

Maria Sultana Mou owns the bakery in the capital.

Mou had hoped to open additional production plants and outlets in the coming year, but because of the economic crisis she was forced to reconsider her decision. Sales have dropped by half.

Due to the drop in profits, five of her eight employees were also forced to quit.

CMSME accounts for at least 25% in GDP and creates up to 90% of private sector jobs.