A recent conference in Dhaka, as reported by the media on November 3, has highlighted the need for making good use of the Small and Medium Practices (SMPs) in guiding the small and medium enterprises in Bangladesh to their full growth. Regulations for such enterprises, as the experts said, should benefit the businesses by creating a fair and efficient market. The regulations, as they further noted, should in no way create obstacles to the progress of small & medium enterprises (SMEs).
The Dhaka Chamber of Commerce and Industry (DCCI) has taken a pioneering role in helping to develop SMEs. Its president Md. Sabur Khan was reported to have said at the conference under mention here that the Chamber is monitoring eighty per cent of the country's SMEs that are contributing significantly to its economic development. Many service business sectors have hired expertise by outsourcing to do business. So there is a large scope to work for SMPs, the DCCI chief further said.
Despite undertaking a few steps, the government and financial institutions are yet to give the needed pull to the SME sector which is considered to be the largest employment and income generator of the economy. The policy-makers are responsible for talking too much and doing too little for it, going beyond the public rhetoric in seminars and outlining policy papers. The government is not pro-active either. Even Industries Minister Dilip Barua has held the 'negative mentality' of financial institutions as being partly responsible for it. He agreed that the SMEs are not getting the necessary support they should have received from different agencies.
The Bangladesh Bank (BB) deserves kudos for requiring banks to open SME banking windows at all their branches. But it is not yet known how many of them have actually done it or how many of them are extending loans to the SMEs at the rates that the central bank has asked them to do. The banking sector's financing focus has largely been on the big borrowers. The Hallmark loan scam and other disclosures of irregularities about big loans showed how these financial institutions have become captive to the vested interest groups who are active about swindling money. Some dishonest people are getting loans while genuine operators in small and medium scale manufacturing and service sectors which are actually promoting the economic activities, do hardly get proper access to bank credits.
The key factors that inhabit the growth of the SMEs in Bangladesh are access to capital, high lending rate, weak marketing and lack of diversified products for export etc. It is vital to strengthen the SMEs for overall economic development. Everybody agrees about the SMEs' problems but no substantive action is being taken.
The BB has already introduced several schemes and credit lines to help expand SMEs' role in the economy. Refinance schemes, funded by the BB, the WB's soft-loan lending arm, International Development Association (IDA) and the Asian Development Bank (ADB), are focused on developing the sector by ensuring the institutional financing under easy conditions. The central bank has also taken various steps in this regard. But in reality these are not being properly implemented. As a result, the economy's largest employer ends up as a loser though it is being recognised as the major thrust sector for industrial growth.
In fact, the SMEs are the largest contributors to the country's gross domestic product (GDP) and expansion of opportunities for industrial employment. The SMEs account for the lion's share of private sector industrial establishments, provide employment opportunities to roughly three-quarters of the non-agriculture labour force and contribute to more than one fourth of the country's GDP, according to a data of SME Foundation.
In higher-income countries, SMEs contribute to over 55 per cent of their GDP and over 65 per cent of the total employment. Barring a few fertiliser firms, pharmaceutical companies, cement factories, steel and telecom companies, all other business entities in Bangladesh are SMEs. There are about 8.0 million SMEs in the country, about 75 per cent of which are located in the rural areas.
Among the challenges that the SMEs in Bangladesh face, are poor infrastructure and poor utility supply, unavailability of collateral-free bank credits, and high lending rates, limited access to information, traditional technology, and low productivity of labour. Bangladesh adds 2.0 million people to its labour force annually, and a significant portion has great potential to be self-employed. They can be engaged in creating a strong force for effective economic growth, through creation of new entrepreneurial opportunities.
To achieve the employment targets, industrial growth, improved socio-economic structure and to have a positive impact on the GDP aligned with the targets of the government-announced policies, the DCCI, in association with BB, has come forward with an innovative idea of creating 2,000 new entrepreneurs in 2013, along with a parallel event of an expo titled, "Entrepreneurship and Innovation Expo-2013". To support the business community at home and abroad, especially the SME entrepreneurs, the DCCI has set up DCCI Helpdesk on its own premises. This is aimed at providing one-stop services regarding registration, trade, commerce, business and investment, to all members of the business community, in general. It is indeed an effective move to facilitate sustained growth of more SMEs in Bangladesh.
What is now badly required is the SMEs' need to upgrade their technological capabilities and production facilities in order to produce quality products at competitive prices. The use of energy efficient technology can enhance the industrial production. Only quality products can sustain the challenges in the global market.
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