Unlocking full potential of SMEs

The country's cottage, micro, small and medium enterprises (CMSME) sector despite having immense growth potential receives only lukewarm response from the authorities concerned. The sector did not get necessary policy and financial support for its growth which is evident from the fact that the recently concluded SME Policy 2019 had no fund allocation to meet the demand for approximately TK 105 billion. Naturally, it raises question about the benefits of such a policy that fails to fulfil its core obligation of providing funds to boost the sector's contribution to the GDP. Such a frustrating development has been taking place when the volume of foreign direct investment (FDI) is not very encouraging, domestic private level investment advancing at a snail's pace, industrial production limping for short supply of power and energy and millions of youths are jobless. If properly nurtured, the sector could have made even greater contribution to the country's economy---a clear development discernible in some of the neighbouring countries.

According to a BBS economic census conducted in 2013, the CMSME sector had as many as 7.81 million enterprises, providing jobs to a total of 24 million people and accounting for 85 per cent employment in the industrial sector. Despite such a large number of enterprises and workers employed with those, the sector contributed only 27 per cent to the GDP whereas it stood at 37 per cent in India, 40 per cent in Pakistan, 52 per cent in Sri Lanka and 60 per cent in China. The above facts reaffirm that the CMSME sector was not developed to the optimum level despite boundless growth potential.

For obvious reasons, the SME sector is considered an engine of economic growth and social development, and rightly so in countries like Bangladesh. The above mentioned countries with higher contribution of the SMEs to GDP developed the sector really like a driving force and successfully propelled their economies forward. But Bangladesh failed to ensure the sector's optimum growth and reap the benefits. However, a positive development in this regard is that the ministry of industries has initiated framing of a new policy styled as the National SME Policy 2025, as is reported by this paper. This policy in the offing aims to boost contribution of the SME sector to 35 per cent by 2030 from 27 per cent at present. This policy should be designed in a way that it serves as the springboard for subsequent growths.

The crucial importance of the CMSMEs in this resource-constraint country becomes more evident against the backdrop of poor foreign direct investment crucially indispensable for growth of big industries, difficulty in the mobilisation of adequate investible surplus, slow pace of domestic investment in the private sector and low level of technology and workers' skill. Relatively less volume of investment required for small size factories, ease of management and skill development of workers make it easier to set up and develop SMEs provided that those are backed by adequate fund and policy measures. Banks should also feel encouraged to provide these enterprises with loans at cheaper rates considering the latter's loan repayment records of 56, 70 and 72 per cent in 2017, 2018 and 2019 respectively. Marketing facilities for the products of these enterprises both inside and outside the country should also be expanded. The development of the sector to its optimum level will help solve unemployment problem significantly, diversify export basket and increase export earnings along with increased contribution to the GDP. Maximum efforts must be made to take development of CMSMEs to an even higher level as development of those lays a solid foundation for the growth of big industries.

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