Liquidity, not demand: Why small restaurants struggle during Ramadan

Every year, as the holy month of Ramadan approaches in Bangladesh, neighbourhood restaurants and tea stalls undergo a familiar cycle. They shut down during the day, reopen before Maghrib, and focus on selling snacks and iftar meals. 

On the surface, business appears to slow: lunch crowds disappear, afternoon streets grow quieter, and small eateries struggle to attract customers during fasting hours.

Yet this surface impression is misleading. What small food businesses experience during Ramadan is not a collapse in demand but a compression of revenue. Earning opportunities are concentrated into a narrow window around sunset and before Sehri, rather than being spread throughout the day. The real challenge for these enterprises is not weak demand, but poor cash-flow planning.

The broader economic backdrop makes this even more significant. As of January this year, food inflation in Bangladesh stood at around 8.29%, placing additional pressure on household budgets even before Ramadan began. 

Reports from wholesale markets such as Khatunganj showed price increases in key Ramadan staples, including lentils, edible oil and sugar, in the run-up to the month. Despite official assurances about import buffers and supply flows, seasonal demand and supply chain pressures continued to influence local prices.

For ordinary consumers, this means entering Ramadan with already elevated food costs. For small eateries, it means rising input prices alongside a dramatic shift in revenue timing. When the cost of edible oil or gram increases even slightly, margins on fried iftar items narrow immediately. 

Unlike large chains, neighbourhood restaurants cannot easily hedge prices, negotiate bulk import contracts or absorb short-term cost volatility. Their pricing power is limited by local competition and customer sensitivity.

Most restaurants respond with tactical adjustments. They pivot from lunch plates to fried iftar snacks such as piyaju, beguni and samosas. They reduce daytime staffing. Some extend operations late into the night for Sehri customers. These responses are sensible from an operational standpoint. However, they do not address the core issue: a mismatch between when money comes in and when expenses must be paid.

Rent, wages, utilities and supplier payments do not pause during fasting hours. For a small restaurant that earns little or nothing between sunrise and sunset, the daily cash cycle tightens immediately. Even if evening sales are strong, the absence of daytime liquidity creates stress. Economically speaking, Ramadan produces a revenue-compression shock. Income is not eliminated; it is condensed into fewer hours. For businesses without reserves or working capital buffers, this condensation can feel like contraction.

In many cases, this gap is temporarily bridged through informal credit. Suppliers may allow short-term delayed payments. Family members may provide small cash support. Some owners dip into personal savings accumulated before Ramadan. But these coping mechanisms are reactive and fragile. They do not transform the revenue structure itself.

Yet several underutilised strategies could help small food businesses manage this rhythm more sustainably.

Sehri subscription packages could represent a practical shift in business models. Many urban households struggle with last-minute Sehri preparation, particularly working families and students living away from home. 

A neighbourhood restaurant could introduce a prepaid 30-day Sehri meal plan, collecting payment at the beginning of Ramadan. This would generate immediate working capital and turn uncertain early-morning demand into a stable, predictable revenue stream, enabling clearer cost planning.

Prepaid iftar bundles address a different issue: price risk. Restaurants could sell discounted iftar packages in advance, allowing customers to lock in prices before further fluctuations in edible oil and other staples. 

In a month when seasonal demand often pushes costs upwards, advance payment acts as a simple hedge. Customers gain price certainty, while vendors secure early liquidity and improve inventory planning. Yet most small food businesses still rely entirely on daily cash sales rather than structured revenue models.

Rather than closing during fasting hours, restaurants could also use idle kitchens to produce bulk fried items for wholesale supply to roadside vendors or larger iftar markets. This business-to-business pivot would generate daytime cash flow while leveraging existing infrastructure. Instead of waiting passively for sunset, the restaurant becomes part of a broader supply chain.

Micro corporate contracts can also be a strong stabiliser. Large hotels actively pursue corporate iftar packages with offices and institutions. Small neighbourhood restaurants rarely do so, even though nearby coaching centres, clinics, NGOs and small offices could provide modest but stable daily contracts. Even guaranteeing 40 or 50 meals per day would significantly reduce revenue uncertainty.

None of these approaches requires heavy investment. They demand planning, modest coordination and a shift from reactive daily operations to short-term financial design. The barrier is not capital; it is mindset.

Why are such models uncommon? Structural informality plays a major role. Many micro-entrepreneurs lack formal accounting systems and do not engage in cash-flow forecasting. Decisions are made day by day. Ramadan is viewed as an inevitable seasonal slowdown rather than a temporary economic reconfiguration. When a phenomenon is culturally normalised, it is rarely re-engineered.

At a macro level, however, the food economy does not shrink during the holy month; it reorganises. Evening markets and historic iftar hubs such as Chowk Bazaar in Dhaka experience intense nightly activity. Consumption patterns shift, but they do not disappear. If anything, total food expenditure during Ramadan often increases because of social gatherings and hospitality traditions.

This distinction matters. When demand is redistributed rather than reduced, the appropriate response is restructuring, not resignation. Small restaurants do not lack customers; they lack liquidity-smoothing mechanisms.

There is also a policy implication. SME support initiatives in Bangladesh frequently focus on expanding credit access but pay less attention to short-term revenue timing risks. 

Pre-Ramadan financial literacy sessions, simple digital subscription tools through mobile financial services, and awareness campaigns about prepaid models could significantly reduce seasonal stress for micro food businesses. Addressing liquidity design would be more effective than treating Ramadan as an unavoidable slump.

Ramadan is a month of spiritual discipline, but it is also an economic cycle with its own rhythm. Businesses that interpret it as a slump will endure stress. Those who recognise it as a liquidity design challenge may discover that it becomes one of the most predictable and stable months in their annual cycle.

Ramadan reshapes revenue; only planning determines who thrives.

Shaikh Afnan Birahim is a writer and analyst.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.