Home ›› 30 Oct 2022 ›› Special Supplement
If the spine is considered one of the most important parts of the human body, then the Small and Medium Enterprises (SME) sector should be clearly understood as the present and future backbone of Bangladesh’s economy.
Every story of the life of the entrepreneurs in the country’s SME sector is heart touching and the path of moving forward and overcoming all obstacles gives a thrilling feeling. At the same time, the stories of failure here are also painful.
According to the SME Foundation, 7.8 million entrepreneurs are working with thousands of different products in the country. Most of them are working in villages or suburbs of cities or towns. The number of people directly and indirectly employed in SME businesses is about 2.5 crore. An important aspect of SMEs is that there are significant numbers of women entrepreneurs as well as men.
According to the Planning Ministry, 45 per cent of productive value addition, 80 per cent of industrial employment and 25 per cent of working people are involved in SMEs. That is 31 per cent of the country’s GDP. The SME sector is considered the most successful sector in Bangladesh, as it plays a significant role in poverty alleviation and the creation of new employment.
In most developed countries, the SME sector contributes to over 50 per cent of the GDP. In India, the ratio is 60 per cent and 45 per cent in Vietnam.
According to SME Foundation Chairperson Professor Md Masudur Rahman, the foundation is now working to raise the SME sector’s contribution to the country’s GDP to more than 35 per cent by 2030.
Industry insiders believe that the most significant problem in the case of SMEs is the short-sightedness of the banking sector and its retroactive thinking towards banking support to SMEs. The entrepreneurs’ small capital faces big risks. Also, banks do not want to provide them with long-term loans at low interest.
According to World Bank data, there is a $2.8 billion investment deficit in the SME sector. If the banks played a more positive role, Bangladesh’s economy would benefit a lot through this sector.
Easing rules, especially in the investment of banks such as collateral management, appears to be a complex equation. Also, bureaucratic complications at the government level in conducting business greatly hurt the SME sector.
The National Board of Revenue lacks long-term planning as well, which we have come to know through the national budget. Any demand made by the SME sector is never given special consideration. The shortage of skilled workers is also a major problem.
In June this year, the SME Foundation and Social Commission for Asia and the Pacific (UNESCAP) jointly organised a national workshop, titled Rethinking MSME Finance: A Post-Crisis Policy Agenda. It revealed that SMEs get access to only one-third of the fund they need for running businesses, while rural entrepreneurs receive only 19 per cent of the funds disbursed.
At the workshop, Bangladesh Institute of Bank Management’s Associate Professor Dr Md Mosharref Hossain said that some 5.8 million SMEs, out of the total 8.1 million, operate in Bangladesh’s rural areas. However, urban SMEs get access to 81 per cent of loans and female entrepreneurs only 7 per cent.
Ironically, a recent study found that more than 52 per cent of SMEs need to pay bribes to avail of essential services at various government offices, including acquiring and renewing licences, using public utilities, obtaining a Tax Identification Number, and obtaining a Value Added Tax certificate.
The study, conducted by the Centre for Governance Studies in partnership with the Center for International Business Enterprise, collected data between mid-October and mid-December 2021 from 800 nationally representative SMEs, including 400 manufacturing and 400 service sector enterprises.
In September 2019, the Industries Ministry announced the SME Policy 2019, which will be valid until 2024. The policy has been made keeping in view the country’s Vision 2021 and Vision 2041, where the Least Developed Country status by 2024 and the implementation of the UN’s Sustainable Development Goals by 2030 will serve as the key goals.
Keeping the problems of the SME sector in front, it is significant to create an SME-supportive environment, ensure modernisation, and marketing policy and make SMEs as a backward linkage for big industries.
It is very important to change the thinking of our policymaking bodies to understand the radical change that will be achieved in the socio-economic context if we give more importance to SMEs.
If the ability or skills of Bangladeshi entrepreneurs cannot be utilised, then our achievements may get lost amid the battle for survival in the current world situation. Although SME entrepreneurs are hopeful, the energy they have created through the combination of hard work and talent is a rare example in the world.
The writer is the Chairman, KPC Industry and winner of Best National SME Entrepreneur of the year (2016)
