SME and policy interventions

The five-day Small and Medium Enterprises (SME) fair that began in the capital on Sunday is a timely initiative on part of the government. Braving the coronavirus and hardship being encountered by the sector, showcasing their products of diverse categories is indeed a bold step to take the sector that employs a lion’s share of the country’s industrial manpower to the next level. Sectors like agriculture, food processing, agricultural manufacturing tools, ICT (Information and Technology), software, leather, leather products, light engineering, jute or jute products, plastic, handicrafts, artificial jewelry, toys, and agar industry-related SMEs are getting prioritised in the fair. At present micro, small and medium enterprises (MSME) employ a huge number of people and they contribute about 25 per cent (ADB 2015) to our GDP. At the inaugural function of the fair, business leaders sought policy supports for boosting the SME sector.

Sustaining the SME sector requires special policy support as a lack of close ties with banks is depriving these small-scale traders of due benefits of the government's stimulus packages, said FBCCI President Md Jashim Uddin at the programme. The focus is essential because the SME sector is considered to be the economy's backbone and forms the backward linkage of the export industry, one of the sources of the country's foreign currency earnings, Jashim added. In this regard, it is necessary to look into the focus the SME Foundation laid to make the sector flourish. The foundation in its SME policy guidelines affirms adopting the right strategies and steps to expedite the development of the SME sector. Effective SME strategies will be built upon the following six factors, the guidelines mention. The factors are-access to finance, access to technology and innovation, access to market, access to education and training, access to business support services, and access to information.

Actually, our SME sector has been surviving and growing on its own. Individuals having no institutional knowledge and training or strong capital base are making their entries, employing themselves, and creating opportunities for others. In most cases, novice new entrepreneurs falter, count loss, and quit their ventures due to a lack of liquidity and expertise. Those having additional capital support with loss-making experience, restart again and begin experiencing success. The picture is almost identical in most remote corners of the country. A small number of new businesspersons with experience, however, can make their fortune with their capital in their first attempts. It is seldom found that banks or other financial institutions come forward to promote or finance new ventures. The lenders tend to finance those who have enough collateral, not those having experience but lacking collateral.

Then, how can the government machinery here play an effective role to salvage the sector and create new entrepreneurs?

The commonly perceived and also perhaps generally encountered difficulties of operation of the SMEs include lack of institutional credit, non-availability of working capital, low levels of technology, low productivity, and lack of marketing facilities and market access problems.

The sector lacks product diversification and quality, adequate research and development, reliable statistics, attractive packaging, capital, and knowledge of related information technology. SMEs have been an important source of employment in Bangladesh. The sector employs about 24 million people, of which 23 per cent are engaged in manufacturing SMEs. Only capital-based SME promotion and activities will not help that much in creating new small and medium enterprises. The government, particularly the industries ministry and the SME Foundation have to go to district levels to train youths. The SME Foundation can launch internship programmes with collaboration with the private sector so that potential entrepreneurs can have first-hand experience before they start their ventures.

Capital is necessary and policy supports are critical to promoting the SME sector.