Rapid Response Research to COVID-19
The Effects of COVID-19 on Small Firms:
Evidence from Large-Scale Surveys of Owners and Employees
Asad Islam, Director, CDES; Professor of Economics, Monash University Atiya Rahman, Senior Research Associate, BIGD
Atiya Rahman, Senior Research Associate, BIGD
September 27, 2020
Background
Aim
Understand the current situation of the SMEs and their workers compared to the pre-COVID19 situation in Bangladesh
Focus
Light Engineering (LE) firms
Light Engineering (LE) firms
The research team previously evaluated a BRAC intervention with LE firms using a large-scale RCT in 2017 and we surveyed all LE firms in our RCT
A small sample of other types of SMEs
provided by BRAC Bank
Survey on Enterprises: Profile
Survey Period July 14-23, 2020
Survey Method Phone interview
Successful Sample Automobile
Other firms (clothing/tailo ring/genera/b eauty parlour/
variety)
Sample: % of LE and other types of SMEs
Successful Sample
1960 out of 2374 LE Firms and other SMEs
Respondents’ Sample Male respondents: 99.13%
Average age: 42 years
Automobile spare
32%
Grill 25%
Agricultural machines, acc
essories and spares
16%
Other LE firms 22%
variety) 5%
LE: 95%
Others: 5%
Survey on Workers: Profile
In addition to the enterprise owners, we surveyed a group of BRAC’s trainees on LE sectors and
selected youths for BRAC’s training
We successfully interviewed 1014 out of 1652
[CATEGOR Y NAME], [V
ALUE]
We successfully interviewed 1014 out of 1652 youths
Male, 78.2 0%
Out of 1014, 798 (79%) youths were employed in February
Average age: 23 years
Enterprises
Enterprises
Business Operation Status
One-third of enterprises were partially open in July 2020
69.13 60.71
37.35 40
60 80
% of All Enterprises
2.04
28.83
37.35
0 1.94 20 40
Business fully open Business partially open Business closed
% of All Enterprises
During Lockdown July, 2020
Business Operation Status (Cont’d)
25.71
10.86 14.14
21.97
7.85
Before lockdown During lockdown July, 2020
4.51
7.85 July, 2020
No. of daysworkshop open in
past one month Average hours a day workshop
open in past one month
Business Operation Status by Enterprise Type
Distinctive service sectors are less likely to operate at full capacity after the lockdown
59.84 64.01 67.96
56.02
44.00
59.09
27.27 40
60 80
% of Enterprises fully operating
During Lockdown July
Distinctive Service Sectors
2.36 2.87 1.84 1.16 8.00
0.00 0.00 0.00
27.27
22.58
0 20 40
% of Enterprises fully operating
Automobile
spare Other
LE Agricultural
machineries, ac cessories &
spares
Grill business
General/
Variety stores
Clothing/
tailoring Beauty
parlour Hotel
Drop in Sales by Enterprise Type Relative to Pre-COVID19
Distinctive service sector (where interaction is essential) are facing severe drop in sales
0
Other LE Automobile
spare
Agricultural machineries, accessories &
spares
Grill business
General/
Variety stores
Clothing/
tailoring
Beauty
parlour Hotel
-69
-80 -72 -70
-82
-100
-88 -80
-57
-45 -50
-57
-71 -80
-69 -59
-120 -100 -80 -60 -40 -20
During lockdown In July
Current Operation Status by Initial Capital of LE Firms
Poorer owners are less likely to operate their business at full capacity
52.06 58.35 69.63 69.35
60 80
% of enterprises fully operating at present 0 20 40
1st quintile
(Mean: BDT 235k) 2nd quintile
(Mean: BDT 503k) 3rd quintile
(Mean: BDT 845k) 4th quintile (Mean: BDT 2246k)
% of enterprises fully operating at present
Categories based on initial capital
Drop in Sales relative to pre-COVID by Initial Capital of LE Firms
Poorer owners are facing severe drop in sales after the lockdown
0
Drop in sale relative to
1st quintile 2nd quintile 3rd quintile 4th quintile
-48.59
-52.83
-44.36
-25.24
-60 -40 -20
Drop in sale relative to pre-COVID (%)
More owners are unable to pay rent and utility in July
15.87
21.96
13.37 10
15 20 25
% of Enterprises
Sales drop is 15 percentage points higher for those who were unable to pay rent compared to those who paid rent
1.82 1.12
7.6
0 5 10
Were unable to pay the workshop rent in the past
one month Were unable to pay the utility bill in the past one month
% of Enterprises
Before lockdown During lockdown July, 2020
Consequences on Hired Workers of open/partially open enterprises
98.01
81.32
40 60 80 100
% of open /partially open Enterprises
24.3
11.29 0
20 40
Laying off workers Workers worked for less hours or got paid for less hours
% of open /partially open Enterprises
During lockdown July
Disruption/Extreme Disruption Faced During Lockdown
40.26 9.75
22.40 9.95
18.67
Insufficient protective equipments Credit related complexity Clients not paying outstanding bills rent/fees/taxes travel restrictions
39.29 25.20
7.25
75.26 3.52
0.97
Shut down of operations due to … Raw materials became very … Workers available but hours of …
Reduction of orders Inability to deliver existing orders Insufficient protective equipments
% of All Enterprises
Coping with the Shortage of Raw Materials After Lockdown
24.90
16.58
14.44 12.76
15 20 25 30
% of open /partially open Enterprises
61% of the enterprise owners reported to have shortage of raw materials after lockdown
1.73 0.92
0 5 10
Reduction of
production Outsourcing
orders Increasing
product prices Seeking new procurement
channels
Delaying
goods delivery Others
% of open /partially open Enterprises
Time Required to Resume Full Operation
10.41
19.18
46.33
3-6 months
> 6 months Don't know/Uncertain
75% of all enterprise owners are highly worried about the future of their business
6.68 0.15
1.48
7.14 8.62
Currently on full operation Less than 2 weeks 2-4 weeks 1-2 months 2-3 months
% of All Enterprises
Access to Business Loans/Grants to Support Business Recovery
47% of the enterprises have access to loan/grants to support business recovery
43.62
50.96
47.14 50.77
40 60
% of All Enterprises
23.44
0 20
Automobile sparesAgricultural machineries, accessories and sparesService Sector (Beauty parlour, hotel, clothing/tailoring)Grill business Other enterprises
% of All Enterprises
Recovery Planning
One-fourth
enterprises have no access to loan and no plan for business recovery 37.7
28.72
24.59 20
30 40
of A ll En te rp ris es
8.98 0
10 20
Loan/Grant+ Plan No Loan/Grant+
Plan Loan/Grant + No
Plan NO Loan/Grant + No Plan
% o f A ll En te rp ris es
Government Support
3 Months time gap between Bangladesh Government’s declaration of stimulus package for SMEs and Our survey
1226 out of 1960 enterprises (63%) know about the package 65 out of 1960 enterprises (3%) applied for the support 65 out of 1960 enterprises (3%) applied for the support
1 out of 1960 enterprises received the support
1000 out of 1960 enterprises (54%) don’t know how to apply
Which Enterprises Applied for Govt.
Support
Were open during lockdown
Were more profitable during the pre-COVID
Have higher amount of current sales
COVID-19 Symptoms
Workers of service sectors are more likely to have any of the COVID19 symptoms
Symptom during last three months
Anyone in the workshop (% of
workshop)
Owners' HH member (% of
workshop)
Automobile spare 23 26
Automobile spare 23 26
Grill business 30 34
Agricultural machineries, accessories and
spares 26 34
Service sector 33 39
Other enterpries 26 36
Are the business closed because of workers’/ owners’ COVID19
symptoms ?
There is no significant correlation between openness of the enterprises and workers having any of the COVID19 symptoms
i.e. fever, cough, shortness of breathing
i.e. fever, cough, shortness of breathing
Intervention Recipient Vs. Non- Recipient
Intensive training on occupational health and safety and financial linkage to a group of the surveyed owners by BRAC in 2017/18
Before lockdown (Feb,2020)
During lockdown
As most of the After
lockdown, intervention (Feb,2020)
Intervention recipient owners were making 14% higher profit compared to non- recipient owners
As most of the enterprises were closed during
lockdown, intervention recipient did not make more profit compared to non-recipients
lockdown, intervention
recipients making double
profit compare to non-
recipients
Workers
Workers
Workers’ Employment Status and Income Drop Relative to Pre-COVID
Female workers are losing jobs and are less likely to return to work after lockdown
-30 0
Drop in monthly income COVID (%)
Male
58.01
48.55 84.62
61.85 60
90
% of Employees in February
Female
Poorest recovery for female
workers
-60.21 -64.53
-29.46
-52.08
-90 -60 -30
Drop in monthly income relative to pre-COVID (%)
During lockdown July
0 30
Male Female
% of Employees in February
During lockdown July
Per Day Earnings gap (Female-Male)
Gap is widening because currently employed female are working more days compared to their male counterparts
0
Per day earnings gap
Before
lockdown During
lockdown July
-190.69 -200.90 -207.11
-250 -200 -150 -100 -50
Per day earnings gap (BDT)
Maintaining Health Guidelines at Workplace
Female workers are more likely to wash hands more frequently
83.46
71.28
85.80
82.46 76.60
92.88
40 60 80 100
% of Currently Employed
0 20 40
Regularly wear mask during work Regularly maintain 1.5 meters distance from co-workers during
work
Wash hands with soap/handsanitizer more frequently compared to before
% of Currently Employed
Male Female
COVID-19 Symptoms
24% of the current workers reported that anyone at their workplaces had symptoms i.e.
fever, cough, shortness of breathing in the last one fever, cough, shortness of breathing in the last one
month
Workers’ Perception of being Infected by COVID19
32.58 38.74
% o f C ur re nt ly E m pl oy ed
There is risk to get infected but earning livelihood is first priority
1.8 8.26 11.41
7.21
No possibility
Might get infected so staying away from work Might get infected but cannot stop work High chance but not worried High chance and very worried Will be infected today or tomorrow
% o f C ur re nt ly E m pl oy ed
Conclusion
• Enterprises are struggling to earn profit after the lockdown
• Fragile service sectors where social distance is difficult to maintain
• Poorer enterprises are at greater risk
• Cutting down the production to cope
• Cutting down the production to cope
• Limited access to formal financial support
• No access to the Government support package
• Female workers are at greater risk
Next Steps
• Link this data with the benchmark data (i.e. endline survey of the RCT study)
• Conduct further two rounds surveys to explore the coping and recovery dynamics of these firms
recovery dynamics of these firms
Get in Touch
• Asad Islam
Director, Centre for Development Economics and Sustainability (CDES) Professor, Department of Economics, Monash University
Email: [email protected]
• Atiya Rahman
Senior Research Associate,
Brac Institute of Governance and Development (BIGD), Brac University Senior Research Associate,
Brac Institute of Governance and Development (BIGD), Brac University Email: [email protected]
• Rafia Nisat
