Technical Efficiency of Handloom Industry in Bangladesh: A Study

Abstract

The handloom textile industry is one of Bangladesh's major labor contributing endeavors that provides income and employment opportunities for a sizable section of rural labor. However, in recent years, the handloom textile industry has been experiencing severe competition with the power loom textile industries in terms of technical efficiency, wage discrimination, and profit margin. This study aims to measure the technical efficiency of the handloom textile industry in handloom rich areas of Bangladesh. This study used multistage sampling techniques to collect data from 50 handloom textile industries in the Sirajganj district. The Stochastic Frontier Analysis (SFA) technique was used to assess technical inefficiency and production efficiency. In contrast, the Benefit-Cost Ratio was used to determine the profit margin for handloom textile industries. The results show that the sample means technical efficiency is 79 percent, ranging from 38 to 100 percent. The SFA regression model also indicates that 66 percent of handloom industries have a 0.75–1.00 efficiency score, while 6 percent of the firms operate below 50 percent of technical efficiency. The Benefit-Cost Ratio analysis shows that handloom products are not highly profitable. The study also found that the existing handloom textile industries face high prices of colors and fabrics, lower adoption of technical knowledge, and obstacles to access to credit, all of which affect the production efficiency of handloom industries. With the foremost prospect of this industry, government policies should address the above problems to ensure favorable textile production in the study area.