SME Foundation limps with fund crunch
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Shoe manufacturing hub at Bhairab in Kishoreganj is the largest of the country's 177 shoe-clusters, identified by the Small and Medium Enterprise Foundation (SMEF) that imparts trainings to startups for skills development, and helps them get low cost fund.
According to the sector insiders, for lack of low-cost financing, the immensely potential shoe making business at Bhairab is failing to flourish as per the expectation.
Sobuj Mia, president of Bhairab Footwear Factories Owners' Association (BFFOA), has said currently around 6,000 factories (60% small, 30% medium and 10% large) are operating at Bhairab sadar and adjacent areas, where nearly 70,000 people are employed.
“We are grateful to SME Foundation for providing us with necessary supports, including trainings and financing," he say, while talking to Dhaka Tribune.
“As the number of small entrepreneurs is huge, we need more low cost fund to survive and expand," he adds.
He further says if sufficient and low cost fund along with other technical supports are provided, the local footwear makers can play a significant role in the country's economy.
Echoing Sabuj Miah, Golam Azam Tikul, president, Forum for Agro Machinery Manufacturing of Bogra Light Engineering Cluster, says they are also facing the similar problem of fund crisis in expanding their businesses.
Suman Chandra Saha, assistant general manager of finance and credit of SME Foundation, says since the beginning they have been instrumental in providing funds to entrepreneurs and helping them produce high quality products.
But for lack of sufficient fund, they cannot expand their activities at the desired level, he laments.
“Along with many other supports, SME Foundation provides finance to entrepreneurs through clusters, but right now we can’t provide sufficient fund,” he says.
A cluster consists of more than 50 entrepreneurs, according the definition of SME Foundation.
The SME Foundation provides 12 banks and financial institutions the fund at 4% rate to be lent to small and medium entrepreneurs at 9% interest rate.
SME Foundation Chairperson KM Habib Ullah says with an endowment fund of Tk200 crore, the foundation started its journey in 2007.
“The fund has been kept with a number of banks as deposits and every year the foundation gets Tk12-16 crore in interests, which is disbursed as loans among entrepreneurs through the selected 12 banks and financial institutions,” he informs.
He further says the overall SME lending is growing in the country and currently around one crore SMEs are contributing to the country’s growing economy.
“But lack of funds reduced our capacity to boost the sector and it has become tough to run this sector at a high speed with such low amount of funds," the chairman says.
He says the SME Foundation sought another Tk500 crore as endowment fund from the government at different time to help entrepreneurs in a bigger way.
Problems hindering SMEs development
The entrepreneurs are confronted with escalating cost of production which is creating barrier to the competition in free market economy.
“The authorities should provide low-cost loans so that the SMEs can cope with the soaring cost of the production and compete with foreign products," said Habib Ullah.
At present the SMEs face an intense problem of maintaining product quality as they suffer from lack of modern technology to augment their production.
“With the aim to provide proper training to the SMEs, recently we have discussed with Japanese International Development Agency (JICA) and they agreed to send their trainers to our country," he informed.
“Moreover, the government should set up a dedicated laboratory to certify the products produced by the SMEs which will help them understand the quality of their products," he added.
Apart from this, SMEs are being deprived of fair prices of their products because of smuggling of foreign products into Bangladesh.
After the production, the SMEs face problems in marketing as many SMEs do not have showrooms. Even there is no display centre at the divisional headquarters where SMEs can display their products.
To organize the whole process and bring them under a single umbrella the foundation has sought land at Purbachol from the government to set up a permanent exhibition hall for SMEs.
As per the plan, one exhibitor will be allowed to showcase their products for 15 days at the proposed exhibition hall so that all the producers can avail the display opportunity.
The chairperson says the government can think of a SME bank to facilitate loans for SMEs.
In FY 2011-12, SME Foundation identified and mapped a total of 177 clusters across the country. In 2018-19 FY , 14 SME clusters were developed.
Source: https://www.dhakatribune.com
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