Proper Growth And Development Of The SME Sector

15 October 2021


Mozidur Rahman Biswas :
With the establishment of the SME Foundation in 2007, the overall support structure for SME development in Bangladesh became a multi-institution approach. All these were composed of both contributory as well as derogatory factors in the process of development of SMEs in Bangladesh. But considering pros and cons, there has been a noteworthy transformation occurring in the SME sector in the process over the last few decades with the help of various public and private initiatives. In the overall count, it is estimated that 7.5 million MSMEs (including cottage) constitute a significant component of economic enterprises accounting over 97 percent of all enterprises in the country. The share of SMEs in Bangladesh's GDP is estimated at about 25 percent in an ADB study of 2015. Though a number of experts believe that it may be even more if properly estimated. The most authentic figure in this direction is the Economic Census 2013, according to which manufacturing units accounted for 10.9 per cent of all units employing 30 percent of total non-farm employment and the rest were accounted for by trading and services units.
Of course, the improvements of the SME sector so far achieved need to be nurtured in a comprehensive way to help them move ahead  to ensure that SMEs play a stronger  role in the overall growth and socio-economic development of Bangladesh. The SMEs are growing at around 6 percent more annually making this sector an engine of growth. SMEs contribute to the economy not only by itself but also by many of its larger linkage industries. Such as buttons, zippers and many other accessories of RMG industries are now being supplied by the SMEs. The growing importance of domestic industries lies in the economy with a declining role of RMG and remittances in the GDP. The SME sector would get more prominence in the coming years if the sector is properly nurtured with an attempt to place them in better position in the export market of the country.
In view of the fact that SMEs have been an important source of employment for a country like Bangladesh which employs about 24 million people, of which 23percent are engaged in manufacturing SMEs. But the sector has been suffering due to the lack of institutional credit, non-availability of working capital, low levels of technology, low productivity, and lack of marketing facilities, leading to some market access problems. Besides, unreliable power and gas supply, infrastructure deficiencies, compliance issues and stiff competition both in domestic and international markets seem to have been the key bottlenecks for acceleration of development of SMEs.
The latest National SME Policy 2019 encompasses strategies to promote policy and regulatory reforms in order to create an enabling environment for SME development. It implies that will support the creation in strengthening them as formal institutions for providing business development and financial services to SMEs on a sustainable basis. This dynamic strategy takes inputs from ongoing reforms and policies to improve the general business environment with targeted interventions to support innovative enterprises, start-ups and export-oriented enterprises. The main focus of the strategy also includes a set of actions to be undertaken by the government to help create a level-playing field for all SMEs through this regulatory reform. But this will need administrative simplification strengthening provisions for investment in human capital, business development services, better access to finance and fostering of technology transfer. The inherent problem is the definition of SMEs being the source of controversy in Bangladesh. Because different definitions are being followed by different organisations, that are changing in every Industrial Policies of the country. That is why, a uniform definition of SMEs has been felt necessary by the experts to harmonise the activities of SMEs to ensure proper assessment of their actual contribution to the national economy. There is no denying the fact that the current strategy also places importance on the sector but a unified definition for a longer period will definitely facilitate the assessment of SMEs' contribution to the economy.
The Ministry of Industry, being the main regulatory body, and various other functionaries and organisations are involved in SME development in Bangladesh. Each of them works in some specific areas, although with some overlaps. Bangladesh Small and Cottage Industries Corporation (BSCIC), established in 1957, a corporation  to work mainly for the development of small and cottage industries; BSCIC activities also facilitate the development of micro and small industries. Besides, Bangladesh Bank has been facilitating access to finance to SMEs with various policy initiatives, but in absence of proper coordination with other agencies oscillated the progress. Moreover, some private sector organizations such as Micro Industries Development Assistance and Service (MIDAS), Chambers of Commerce and Industries, trade bodies and some domestic microcredit organisations such as BRAC, ASA within PKSF and other international NGOs and donors are also involved in SME promotion activities.
Effective coordination between government agencies such as SME foundation and BSCIC to enhance their activities to facilitate the development of SMEs were not found that much positive. On the other hand, BSCIC has established a network across the country, but in absence of sharing their role SME Foundation could not be benefitted, otherwise, their support could have resolved multifarious problems that trapped the operational process in varied areas.
In pragmatic analysis, the development of SMEs, to help them march ahead in an instrumental way to embark on higher growth trajectories as envisioned in various plan documents of the government like the Perspective Plan 2021 and 2041, various Five Year Plans, Industrial Policies, etc. While Bangladesh has the advantage of promoting SMEs in terms of abundance of human capital with a natural aptitude of intellectual ability, it lacks a conducive and coherent policy environment necessary to boost the sector marching ahead. Besides, inadequate data is another bottleneck to properly estimate the contribution of SMEs to the national economy. The Economic Census of BBS, usually done in a 10-year interval, does not collect adequate information about the actual contribution of SMEs to the national economy. In addition to that, the lack of databases of SMEs also prevents them from accessing various support services of the government. The upcoming economic census should address both data inadequacy and the database of the sector facilitating comprehensive research and pragmatic policy directions.
In fine, the growth and development of SME needs some specific strategies based on better mission and vision adding more dynamism. All these depend on three vital aspects : (i) a favourable policy and regulatory environment, (ii) strong and sustainable institutions providing financial and non-financial services, and (iii) easy access to financial and business services for entrepreneurs including women, rural poor, youths, people with disabilities and ethnic minorities. The wide-ranging development of SMEs is highly necessitated to facilitate the country's poverty reduction and inclusive social-development marked by visionary policy directives for diffusion of wealth to all classes of the citizenry instead of the present position where maximum wealth is in the hands of a section of people. Because, in real sense based of development theories, economic development means (1) to increase the size of the cake (GDP) and (2) to diffuse the cake or total produce/ product in all strata of the society aiming at equal distribution of wealth to avoid any kind of disparity in the greater socio-economic horizon.

(Mozidur Rahman Biswas is a Senior Journalist).

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