Untapped potential of SME sector

The potential of small and medium enterprises (SMEs) is yet to be fully utilised in Bangladesh, although they have the ability to create numerous jobs and increase their contribution to the gross domestic product, say experts.

 

They say it is important to provide SMEs appropriate policy support to develop the sector and to increase SMEs’ contribution to the country’s GDP.

The SMEs are unable to thrive in Bangladesh because of some major challenges like lack of fiscal incentives, management problems, access to finance, policy inconsistency and bureaucracy, they say.

“The contribution of SMEs to the GDP is only 20.25 per cent in Bangladesh. If it is possible to give all kinds of support; the contribution may increase significantly,” said Dr. Mohammad Saleh Jahur, professor of finance department of Chittagong University (CU).

A study conducted by the professor has revealed that the proportion of SMEs to all enterprises is 80 per cent in Bangladesh, while it is 97.60 per cent in India, 99 per cent in China, 99.70 per cent in Japan and 60 per cent in Pakistan.

Jahur said there are some orgnisations working for the SMEs in field-level for the development of the sector. It is needed to enhance the activities of the organisations to help the entrepreneurs in the sector, he added.

Bangladesh has 17,384 micro enterprises, 15,666 small ones, 6,103 medium and 3,639 large scale enterprises where a total of 5.02 million people are engaged, says the study.

Md Nazeem Hassan Satter, general manager of SME Foundation, said there were some problems in the SMEs sector. “If we can resolve them through discussions, the country’s GDP will get a significant contribution from this sector,” he added.

“The country has a huge possibility in the SME sector. If the government or Bangladesh Bank can ensure loans for the real SMEs, there would be a huge opportunity to reduce unemployment,” he said.

“We basically work to give bank loans bank to a possible Cluster and Clientele Group,” he said.

According to the SME Foundation data, they have disbursed SME loan amounting to Tk 80.58 lakh to 1,712 entrepreneurs this year. Of them, 1,200 were male and 512 were female.

On the other hand, access to finance is still the main obstacle for women-led small and medium enterprises as banks hesitate to lend to SMEs run by women.

Women entrepreneurs complain that despite fulfilling the criteria to get bank loans, they are being denied the facility as bankers lack confidence about giving loans to women.

According to BB data, SMEs got Tk 114,461 crore as loans up to September last year. In 2016, the loan disbursement to SMEs was Tk141,935 crore while in 2017 was Tk 161,811 crore.

Sattar admitted that several genuine SME entrepreneurs did not get loan. To reduce such complaint, we are working with the Bangladesh Bank and different bank officials.  

As per the BB's instructions, 20 per cent of all bank loans must go to SMEs.

Talking to The Independent, Nadira Hossain, owner of Ghoroa Boutiques in the Mirpur area, said she tried several times to get access to bank credit, but all her efforts went in vain. “I have been running my business from 2012. Though I have fulfilled all criteria, except getting a guarantor, I did not get any loan,” she added.

Jonaki Haque, proprietor of Jonaki Boutiques and also president of the Bangladesh Women’s Chamber of Commerce and Industries (Rajshahi division), told The Independent that they were working for women’s empowerment. She had received several complaints from women, saying the women were not getting loans,” said Jonaki.

She said lack of confidence in women entrepreneurs was a reason for banks’ reluctance to finance them. She further said many women entrepreneurs did not have a clear idea about the facilities they could avail of due to lack of promotional activities on part of banks.

“Though it is said that banks disbursed thousands of crores of taka as SME loans every year, SME entrepreneurs continue to say only a few of them got such loans,” said an official of the SME Foundation.

He also said many of the borrowers getting loans were not real SMEs. Banks show their other loans as those given SMEs to meet the set targets, he added.

Mirza Nurul Ghani Shovon, president of the National Association of Small and Cottage Industries Bangladesh, said it was a common problem for SMEs. He also said the matter had been taken up with the BB.

“We have talked several times with the bank authorities about the matter. In my opinion, Bangladesh Bank should take initiatives so that the targeted amount actually goes to SME entrepreneurs,” he added.

SM Shaheen Anwar, deputy managing director of the SME Foundation, told The Independent that he too received several such complaints. The bank authorities give their usual reasons for rejecting loan to certain SMEs.

“Without knowing about the loan process or what criteria have to be fulfilled to get loans, people lodge complaints. In most cases, the applicants do not fulfill the loan requirement,” he said, adding that those facing rejection despite meeting criteria should get in touch with him.

“I will talk to the bank authorities in this regard,” he noted.

He said they were regularly conducting awareness programmes among bank officials and SMEs with the help of BB.

On 16 March, a seven-day ‘National Small and Medium Enterprise (SME) Fair-2019’ held in the city for bringing the local small and medium entrepreneurs under a single square of roof.

SME Foundation organised the fair with a view to promoting the SME products, exhibition and introduction of SME goods for expanding business, trade and commerce.

A total of 280 SME entrepreneurs, including 188 women entrepreneurs, exhibited their products at the fair where six best entrepreneurs were awarded. Each winner was given Tk 1 lakh, a trophy and a certificate.

According to officials of the SME Foundation, last year, goods worth Tk 5.56 crore were sold at the fair and got advance buying orders worth Tk10.14 crore.

Awareness programme

To mane SME entrepreneurs and bank officials aware, the SME Foundation have routinely conducted awareness programme and held workshop related to the SME overall activities with the association of Bangladesh Bank across the country.

“We have conducted several programmes about the SME activities with the SME entrepreneurs and officials. We especially focus on rural areas, where people don’t have adequate knowledge about this,” said Satter.

Prime Minister’s Principal Secretary Nojibur Rahman has termed the Small and Medium Enterprises (SMEs) as a driving force for economic growth.

Referring to the various steps taken by the present government for the development of SMEs, he said, the government had created a separate SME

Foundation for its advancement, adding initiatives have already been taken to increase the vibrant participation of SMEs in the capital market.

He said Central Bank of Bangladesh also introduced ‘Agent Banking Scheme’ for SMEs.