Cottage, Micro, Small and Medium Enterprises (CMSMEs) are often described as the backbone of Bangladesh's economy. They account for nearly 85 per cent of the country's industrial base, employ around 11.8 million people and contribute close to 28 per cent of GDP. Yet, despite their importance, CMSMEs remain far from realising their full potential.
At a recent discussion organised by the Dhaka Chamber of Commerce and Industry (DCCI) on "Branding and Marketing Challenges for CMSMEs: Unlocking Export Potential," industry leaders reiterated the pressing challenges holding the sector back. Limited access to finance, inadequate infrastructure, shortage of skilled manpower, insufficient policy support, and stringent loan conditions remain the primary bottlenecks. Added to this are restricted access to local and global markets and the slow adoption of new technologies. These constraints have resulted in a paradox: while CMSMEs employ nearly 85 per cent of Bangladesh's industrial workforce, their contribution to GDP remains stagnant.
One of the most persistent challenges for CMSMEs is their restricted access to finance. Although the government has rolled out refinancing schemes, credit guarantees and stimulus packages, the reach has been far from satisfactory. Disbursement has often fallen short of announced targets. Moreover, stringent collateral requirements by banks and the absence of a comprehensive CMSME database make it difficult for many small entrepreneurs to qualify for institutional loans. This financing gap discourages new ventures and limits existing ones from scaling up or investing in innovation.
Market access is another formidable obstacle. Too many entrepreneurs continue to rely on outdated promotional methods, while neglecting digital tools that could significantly expand their reach. The lack of professional branding, modern packaging and adequate advertising budgets further weakens their visibility in both domestic and international markets. As a result, many businesses fail to identify or connect with their target customers. This disconnect partly explains why a large number of startups fail to survive beyond the first two years of operation.
Institutional support structures also remain underdeveloped. While the SME Foundation organises trade fairs and facilitates participation in international exhibitions, these initiatives are piecemeal and cannot substitute for systematic training in business fundamentals. Entrepreneurs often lack knowledge of branding, pricing strategies, consumer behaviour and customer engagement-skills that are vital in competitive markets.
The policy architecture for CMSMEs reflects both ambition and inconsistency. While official documents underscore the importance of the sector, implementation is often weak. For example, the stimulus packages designed during the pandemic promised substantial relief but actual disbursement fell far short of expectations. Similarly, while cluster development and backward linkage industries are frequently cited as policy goals, little progress has been made in integrating CMSMEs into global value chains.
The Competition Commission, mandated to ensure fair competition, has remained largely inactive in addressing the dominance of large enterprises. This leaves smaller businesses at a disadvantage, often unable to compete on equal terms. Without effective enforcement of the Competition Law 2012, CMSMEs are left vulnerable to market distortions, where powerful players can dictate terms of trade.
This policy-execution gap also explains why Bangladesh's CMSME contribution to GDP remains stagnant while neighbouring countries have seen significant growth. Vietnam, for example, has aggressively pursued cluster-based strategies, integrating small enterprises into export-oriented production networks. The result has been a steady rise in SME competitiveness and global market share.
Despite these persistent challenges, the CMSME sector holds enormous potential to drive inclusive development. Besides a large number of industrial workforce employed in this sector, women now represent 6.47 per cent of SME entrepreneurs, and expanding opportunities for them can create a multiplier effect in poverty reduction and gender equity. Strengthening CMSMEs would therefore not only bolster industrial diversification but also support social inclusion by creating jobs in rural and semi-urban areas where formal employment opportunities are scarce.
The sector's promise is also tied to Bangladesh's broader economic transition. As global trade becomes increasingly competitive and as tariffs on Bangladeshi exports-particularly from the US-create new pressures, CMSMEs could provide the resilience and diversification needed to sustain growth.
Bangladesh's CMSME sector finds itself at a critical juncture. On the one hand, it remains the backbone of employment and industrial activity, providing livelihoods to millions. On the other, its persistent structural weaknesses limit market connectivity, and policy gaps prevent it from fulfilling its potential. Unless these challenges are addressed, the sector will remain fragile with high rates of early business failure undermining long-term growth.
Yet, the promise is undeniable. With the right mix of financial inclusion, policy reform, institutional support and market integration, CMSMEs could emerge as the cornerstone of inclusive and sustainable growth. The challenge before policymakers and industry stakeholders is not just to recognise this potential but to translate it into a coherent strategy that allows small enterprises to thrive. Doing so would not only unlock stalled potential but also ensure that Bangladesh's growth story is broad-based, resilient and inclusive.
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