Home ›› 22 Nov 2022 ›› Front
In a bid to help the Small and medium-sized enterprises (SMEs) sector compete in the global market, the Bangladesh Bank has recommended the government to reduce interest rate on loans to entrepreneurs.
In a recently published study on the SME sector, the regulatory body also recommended to take steps in reducing the sector’s import dependency in light of the ongoing crisis of the US dollar.
The main obstacle to the SMEs growth in Bangladesh is a lack of operating capital investment, according to the study report titled ‘Estimating the contribution of SMEs output on GDP growth in Bangladesh’.
The report said, “Some relevant policies should be formulated to restrict massive imports of SMEs’ products and encourage the local producers via easing interest rates who are facing competition with foreign products.”
Bangladesh is facing a prolonged USD crisis since last fiscal year, owing to a high value of import payment in the last fiscal year. In a bid to tackle the crisis the central bank is regularly pumping dollars into the market from the forex reserves.
According to Bangladesh Bank data, import payment stood at $82.49 billion in the fiscal year 2021-22 (FY22), a 35.95 per cent jump compared to the previous year.
The import payment saw an 11.7 per cent rise to $19.35 billion in the first quarter of the current fiscal year, compared to the same period of FY22. A major portion of the imports are related to the SME sector.
According to the BB research, a solid focus on the SME sector by the government and other organisations can turn it into another well-known sector alongside the ready-made garment industry as Bangladesh moves towards being a developing country.
In this era of intense competition, continuous planning and quality improvement act as a prerequisite for the survival of SMEs, said the report.
It recommended the government to take initiatives to prepare an SME sector database and invest in research and development (R&D) to ensure the strengthening of SMEs.
The central bank said despite its significance in the economy, the SME sector is yet to realise its maximum potential due to some bottlenecks.
The contribution of the SME sector to GDP growth was about 30.4 per cent in FY20.
BB data reveals that the output of SMEs remained steady from 1978 to 1992, while the GDP of Bangladesh expanded due to the other determinants of GDP.
After 1992, however, the output of SMEs began to rise. In 1994, SMEs output was Tk 6,756 crore, and rose to Tk 9,433 crore by 2000. In the next five years, the sector’s output saw a 100 per cent increase to Tk 19,485 crore. In 2015, the output was recorded at Tk 20,040 crore. Since then it has increased to Tk 24,418 in 2020.
Citing the last Economic Census in 2013, the BB study said the total number of establishments in the industrial sector was 78,18,565, of which 99.9 per cent were CMSMEs with cottage industries accounting for the major portion.
The CMSME sector has over 21 million working in it, who work at comparatively low wages.
Besides, SMEs’ contributions to exports vary substantially.
They are more export-focused in China, Korea, and Taiwan than in Japan, Indonesia, Thailand, Malaysia, and Singapore, according to the BB study.
It also highlights the situation of the SME sector in different countries. For instance, it said, SMEs are vital in Singapore because they offer a flexible, skilled manufacturing base that draws larger international corporations.
