Home ›› 21 Dec 2022 ›› Editorial
The economic backbone of Bangladesh is the small and medium enterprises (SMEs). SMEs act as the key driving factor for economic inclusivity and socio-economic stability by increasing national productivity and creating employment opportunities throughout the country.
In Bangladesh, 25 per cent of the country’s total GDP directly comes from the SMEs, and by 2024, the contribution of the SME sector in the GDP is targeted to be increased from 25 per cent to 32 per cent in order to implement the development projections of the government (SME Policy, 2019). Also, these small and medium enterprises are providing employment to 20.3 million Bangladeshi workers.
However, SMEs have been adversely affected by the Covid-19 pandemic and recent economic crisis that had a seriously adverse impact on the prospect of economic growth in Bangladesh.
SMEs have suffered significant financial losses as a result of limited resources, lack of customers’ demand for products or services, difficulty in transportation, challenges with the implementation of newly altered strategic goals and digitalization during the recent economic crisis.
A recent report published in The Business Post (TBP) that reveals that fund crunch has driven many SME entrepreneurs out of business. A good number of entrepreneurs have failed to achieve their dreams due to inadequate financial support.
A recent study showed that demand for finance in Bangladesh for micro, small and medium enterprises is US$ 57 billion. But unfortunately, only 33 per cent (US$ 19 billion) of this demand is currently met, resulting in another 67 per cent financial gap in the sector.
“We have not reached all the entrepreneurs for giving financial support as per the demand due to a lack of adequate money and manpower shortage,” said Dr. Md. Mofizur Rahman, Managing Director of SME Foundation.
In Bangladesh, a very small portion of the micro, small and medium entrepreneurs are getting financial support as per the demand.
Sometimes banks are not reluctant to give loans to the small enterprises of insecurities and sometimes entrepreneurs cannot fulfill the requirements of the financial institutions, he added.
Despite having huge potential, the contribution of the Cottage, Micro, Small & Medium Enterprises (CMSME) sector to the GDP in Bangladesh is still lower than many other countries. In Bangladesh, CMSMEs are the largest segment of the economy. They account for 25 per cent of Bangladesh’s GDP and employ 87 per cent of the population.
And without proper and immediate support to micro, small and medium enterprises (MSMEs), it will be really difficult for the country to attain Sustainable Development Goals, turn Bangladesh into a developed nation by 2041 and achieve the Delta Plan 2100.
SMEs, by nature, are dynamic and a rapidly progressing segment, defined by diversity. The segment is a combination of unique businesses from different sectors and functions at various phases of the business life cycle, with different desires, mixed forecasts and often with owners or leaders with distinctly diverse characters.
Keeping the complex context in mind, the post-pandemic situation and recent economic crisis need a new look, and SME support needs to be redefined by the government, think tanks, banks, chambers and other stakeholders.
In addition, there has to be a holistic approach to planning, which must have synchronisation between all related parties. Different approaches by different bodies having no harmony between them will not add any value. After ensuring proper harmony, we need to redefine and rethink the issues that might be the game-changer for the SME sector.
Familiarising and proper planning for cluster-based SMEs is required at this stage. We have to keep in mind that the cost is always a big challenge for the sector.
A cluster-based approach reduces the supply and distribution costs, thanks to the demographic convenience for both suppliers and buyers. But this approach with certain business facilities and incentives must be ensured first.
