SME production plunges by 30% as energy crisis, soaring costs hit hard

Bangladesh's Small and Medium Enterprise (SME) sector is
witnessing a sharp decline in activity, with production down by as much as 30%
in recent weeks amid the global energy crisis, rising raw material costs, and
frequent load-shedding.
Mirza
Nurul Ghani Shovon, President of the National Association of Small and Cottage
Industries of Bangladesh (NASCIB), told The Business Standard that
the situation is becoming untenable for many small-scale manufacturers.
"The
energy crisis has pushed many institutions to the brink of closure. In many
cases, production has already dwindled by 25% to 30%," Shovon said.
He noted that without a stable power supply, factories are unable to meet their
production target, leading to a massive drop in output across the board.
The
sector, which contributes over 28% to the national GDP and employs roughly
three crore people, is currently navigating its toughest period since the
pandemic.
The
leather and chemical-dependent sectors are among the hardest hit. Ilias
Hossain, the proprietor of Rajex Leather, revealed that essential production
components have become extremely expensive.
"The
price of chemicals used in leather processing has doubled, and in some cases,
even tripled," Ilias claimed.
He added that the cost of imported raw materials from China – such as gum and
pasting – has surged due to global supply chain disruptions linked to the
Middle East conflict. "When raw materials cost this much, the price of
every finished product, from belts to footwear, must go up, which then kills
consumer demand."
While
production is dwindling, sales are also being stifled by operational
restrictions. Shofiqul Islam, owner of Topex Leather, pointed out that the
government-mandated early closing of shops to save electricity has put
businesses in a tight spot.
"We
are forced to wind down by 7pm or 8pm. But our primary customers, specially
service holders, usually come to shop after their office hours in the evening.
Our wholesale and retail sales are taking a massive hit," Shofiqul
explained.
Monoranjan
Sarker Noyon, proprietor of Manikganj-based Noyon Handicrafts, told TBS that
the current economic climate has forced a significant reduction in corporate
and wholesale orders.
"Our
production hasn't been hit significantly yet, but our orders have definitely
decreased," Noyon said, noting that even long-term regular clients are
unable to maintain their usual purchase volumes as consumer demand falters at
the retail level.
Anwar
Hossain Chowdhury, managing director of SME Foundation, echoed these concerns,
stating that the impact on marginal and rural entrepreneurs is particularly
severe.
"The
supply chain is broken. Production and marketing are both suffering a negative
impact that is easily predictable and deeply concerning," he added.
Despite
the challenges, some niche sectors like handmade crafts remain resilient.
Jannatul Ferdous, founder of Bhumi Artisan, noted that while her production
isn't fuel-dependent, the overall economic slowdown might eventually weigh on
even the most specialised markets.
To
prevent a total collapse of the sector, industry leaders are calling for
immediate government intervention.
"The
banks have moved away from single-digit interest rates and returned to higher
tiers," Shovon of NASCIB remarked.
"With
production down by 30% and costs rising, these high interest rates will finish
us off. The government must ensure a return to single digit interest rate to
keep the SME economy alive," he said.
















