Developing cluster-based SMEs

Lack of coordinated efforts by the government, banks and other concerned bodies to promote cluster-based small and medium enterprises (SMEs) is one of the major factors to have impeded efforts for providing proper funding support to the target units. The SMEs are now scattered here and there in the country. This is the ground reality. In this context, the SME Foundation's recent move to find clusters of SMEs in different parts of the country can be considered steps in the right direction. Scattered SMEs have their inherent weaknesses. They cannot put together their efforts in a properly organised manner to seek credit support from banks and other non-banking financial institutions. Even the SME Foundation and other agencies concerned cannot reach out to all the SMEs through the existing mode of their activities. There are limitations as most of these units are located in areas not easily accessible. For this reason, a study to know about the clusters of the government-determined 11 priority sectors, brooks no delay. Such sectors include electronics and electrical, software development, light engineering and metal working, agro-processing industry, leather industry, knitwear and readymade garments, plastic, healthcare, educational service, pharmaceuticals, cosmetics and toiletries and fashion designing.

Once the clusters are identified, the agencies concerned can identify their problems for solution. There are many clusters in the country. These have been developed either naturally or with support from the government. But there is no formal listing. A study will help identify those, focusing on their current conditions and their existing problems. Findings of such a study are most likely to help solve the common problems. It is easy to develop the SMEs through a cluster-based approach. If about 50 SMEs of a priority or growth-booster sector are located within five kilometres of an area, then the place will be called a cluster, as per a definition evolved by the Foundation.

There is no denying that the SMEs hold the key to rapid industrialisation of the developing economies. Overpopulated countries like Bangladesh where a vast youth force scrambles for jobs every year, the SMEs alone can help alleviate their frustrations. Such units provide not only goods that substitute costly imports but also fetch precious foreign exchange through exports. That is exactly why speakers at a discussion meeting in Dhaka last Sunday pleaded for building the capacity of the specialised institutions like that of the SME Foundation to help develop cluster-based SMEs. Strategic development of such industrial units in clusters is one of the pro-active moves in this connection in order to address their sector-specific needs in time and that too, quite easily.    

Meanwhile, the success of microfinance has now paved the way for more formalised SME lending operations in Bangladesh. Considering the impact of the upward mobility of the economy, the authorities need to urgently consider restructuring the growth of the SMEs. Such units have otherwise a better track-record about loan repayments. With establishment of the SME Foundation and incorporation of the SME credit policy and programmes by the Bangladesh Bank, things are now certainly better than what they were before, for development of the SME sector. It now needs co-ordinated efforts like that of facilitation of SME clustering. Pro-active moves for the purpose will go a long way towards achieving a high and sustainable growth trajectory for the sector