1 December 2020

Access to finance is crucial for women entrepreneurs

by Dr. Fahmida Khatun / in Op-ed

In Bangladesh, COVID-19 is impacting the female labour force more

Women’s participation in Bangladesh’s labour force has increased over time, from 24% in 2000 to 36% in 2020, according to the Bangladesh Bureau of Statistics. Of the women in the labour force, the majority (60%) work in the agriculture sector, with 24% in services, 17% in industry and 15% in manufacturing. 

This increased labour force participation has empowered Bangladeshi women. It has improved, to a large extent, their status in the family. Many of them can express their opinions in family decisions. Their nutritional status has improved. Their income contributes to children’s education. Child marriage, and maternal and child mortality, have declined. Several non-governmental organisations (NGOs) played important roles in supporting changes to women’s economic and social lives. The micro-credit programmes of many NGOs provided opportunities for women to engage in income-earning activities. Government policies also helped.

Entrepreneurship in a pandemic

A large number of women are entrepreneurs and self-employed, owners of cottage, micro, small and medium-sized enterprises (CMSMEs). They work in sectors like handicrafts, agriculture, jute products, garments and accessories, retail, tailoring, beauty, health and related services, electronics/IT and software, and online businesses.

These enterprises have been affected due to shocks in domestic supply chains as well as in global value chains due to COVID-19. The impacts have ranged from loss of employment and earnings to depletion of savings and the consequent reduction of household expenditures and scaling-down of business operations.

Economic activities have also shrunk substantially, which has led to dampened demand. According to official estimates, GDP growth during fiscal year 2019-20 was 5.24%, as opposed to the earlier projected 8.15%. International organisations have also estimated a lower GDP growth for Bangladesh, with the International Monetary Fund estimating 3.8% growth and the World Bank projecting 1.6%.

Consumer activity has dropped significantly since the country opened back up in June 2020, and women-owned business have been impacted. However, even if there were higher demand, these entrepreneurs could not have met renewed demand as they have not been able to continue with business as usual due to the capital lost during the pandemic.

Surveys say

Many women have had to scale down their businesses, and many others have had to close down. According to a survey conducted in October 2020 by the Centre for Policy Dialogue, among 70 female-owned CMSMEs across Bangladesh, 49% continued their business operations following the outbreak, while 41% had to close down altogether. Among those who had rented space, 53% could pay their rent regularly but 44% could not. The survey also found that 23% of female-owned CMSMEs reduced the wages of their employees by about 25%, while 47% did not reduce employee salaries.  

A survey conducted by BRAC of 589 women entrepreneurs in July 2020 found that 90% have faced challenges due to COVID-19, and 41% laid off employees because of a significant reduction in income. Two-thirds of survey respondents reported no income, and one-third could not operate their businesses during the pandemic. Worryingly, 86% indicated that they had no options to resolve business-related challenges.

Access to finance?

Since March 2020, the government announced a number of stimulus packages amounting to US$12.11 billion, which is equivalent to 3.7% of GDP. More than 80% of the stimulus includes liquidity support in which banks will provide loans to businesses and affected sectors.

However, these stimulus packages have not targeted the needs of women entrepreneurs adequately. Of the total stimulus, US$2.35 billion, or 0.72% of GDP, has been allocated for CMSMEs. Of this, 5% has been dedicated to women-owned CMSMEs. Loans to CMSMEs will be available from commercial banks at 9% interest, with 5% interest to be paid by the government and 4% by the borrower.

Female entrepreneurs are finding it difficult to access funds from the stimulus packages; access to finance through official banking has always been difficult for women, as they do not have collateral against loans. Despite the advice of the central bank of Bangladesh, commercial banks are generally reluctant to provide loans to CMSMEs because it is not cost effective for them to do so. During the pandemic, the central bank has advised commercial banks to provide loans to businesses based on bank-client relationships. Most female entrepreneurs started their businesses by taking loans from family members, so they do not have track records as bank borrowers. Therefore, it is likely that these women entrepreneurs may not be able to take loans under the stimulus.

There is also an information gap. Many women entrepreneurs are unaware of the stimulus package. Even those who have heard of it did not apply for those loans. One important reason for not attempting to do so is that many women are not familiar with the procedures to apply for loans, and others find the process complicated. There are also dissatisfactions among women entrepreneurs regarding the discriminatory attitude of banks towards them. In general, the disbursement of the stimulus package for CMSMEs has been very slow, even among male business owners for similar reasons, as banks find their cost of operation high in providing loans to CMSMEs.

Bank officials often state that due to the informal nature of many female-headed businesses, banks cannot provide such loans. Many businesses owned by women do not have trade licence and tax identification numbers. The government has allocated US$350 million as a stimulus package to be disbursed through the micro finance institutions. Given the demand for credit, this amount may need to be increased with the prolonged duration of COVID-19.

Coronavirus has accentuated the burden of household work, including care work. Violence against women has also increased. The achievements made by Bangladeshi women may be reversed due to the negative impact of the pandemic. Smooth access to finance is crucial for affected women entrepreneurs to resume their businesses at full capacity and regain their achievements. This will contribute to the economy by way of increasing GDP and creating employment.


Dr. Fahmida Khatun is Executive Director of the Centre for Policy Dialogue, Bangladesh.

Any views and opinions expressed on Trade for Development News are those of the author(s), and do not necessarily reflect those of EIF.