Entrepreneurship must for higher economic growth
Friday, 29 January 2010
Muhammad Mahboob Ali
WHEN the Bangladesh became independent in 1971 entrepreneurship among the local people was limited to only two percent of the total population. It was irony that at that time mostly non-Bengalees were the entrepreneurs. But this part of the world had the glorious history of entrepreneurship in the pre-seventeenth century era. It had Textiles, especially muslin sari, small and cottage industries, shipping industries, gold and silver ornaments, milk products, making of combs and buttons from animal bones, treatment of raw hides, papermaking, sugar, salt industries etc. After the seventeen century the entrepreneurial activities started declining.
Before the birth of independent Bangladesh entrepreneurship was developed mainly by the West Pakistanis in different industrial sectors especially Jute sector. But capital outflowed from this region to the then west Pakistan. Lack of capital and farsightedness of the local people had a lingering bad impact on their life. Almost 98% of the industry, mills, and banks etc. were owned by West Pakistanis and foreigners.
After the independence Bangladesh experienced socialistic economic system during 1972-1975, a kind of mixed economy during 1976-1989 and a free market economy since 1990. After independence of the country, the then government nationalised commercial banks, industries, mills, and factories etc. Savings and investment here were very low. Channeling savings and investment through the formal sector and to expand banking services in the remote areas of the country, nationalisation of the banking sector was one of the major objectives at that time. Bank branches expanded particularly in the rural areas.
However, under the state patronage, industrial activities started. From the year 1976, greater emphasis was given towards private sector and it was largely expedited after 1990. Entrepreneurs also started working different sorts of innovative business ventures. An extraordinary brand of entrepreneurs emerged.
Analysts, argued that in Bangladesh lack of political commitments and absence of healthy environment required for entrepreneurial growth were the discouraging factors.
Lack of entrepreneurship development is one of the reasons hindering the growth of the economy. Entrepreneurship is the main way to develop the country. Half of the total population is women. But they are yet to get the equal opportunity and social empowerment. The country cannot develop its economy without empowerment of women.
After independence of Bangladesh, the then government faced problem in spur industrialisation in absence of an active capital market. Development financial institutions like Bangladesh Shilpa Bank, Bangladesh Shilpa Rin Sangstha and Investment Corporation of Bangladesh worked for industrialisation of the country. Bangladesh Small and Cottage Industries Corporation and export processing zones were created to develop entrepreneurship. Moreover, nationalised commercial banks also took special initiatives to provide industrial credit. Capital market again started working from 1976. But it could not work properly. Moreover, the debacle in the capital market in 1996-97 was the resultant factor of widespread manipulation and irregularities in the stock market.
Meanwhile, the global financial crisis has a negative impact on the domestic economy of the Bangladesh, which leads to shutdown of many small and medium industries of the country. However, within the next fifteen to twenty years the behavioral and psychological pattern of the country will change.
Entrepreneurial activities may work as impetus to economic development process of the country.
The government of Bangladesh has undertaken a number of initiatives in terms of monetary and fiscal related policies and approaches, and tried to implement plans to promote Small and Medium enterprises (SMEs), so that economic advancement of the country is made.
In Bangladesh, an entrepreneur's equity fund has been established in 2000, which provides equity to SMEs in agro-based industry and ICT sector through the commercial banks.
As the prime public sector institution for the promotion and development of small and cottage industries in the country, the Bangladesh Small and Cottage Industries Corporation (BSCIC) is involved in lending programmes from own resources, in association with the Bangladesh Shilpa Bank (BSB); and in association with consortium of commercial banks. Most of its policies are based on government experience in this sector.
Bangladesh Small Industries and Commerce (BASIC) Bank Limited was set up in 1988 with the objective of financing small and cottage industries and it is envisaged that at least 50 percent of its loanable fund should be invested in small scale industries. The bank offers lower lending rates to SMEs compared with other banks. At present, the development of the SME sector is increasingly promoted through the involvement of private agencies, such as MIDAS. MIDAS has recently increased its lending limit to Tk. 100 million. Moreover, export promotion zone is also playing a vital role in development of export-oriented industries.
SMEs sector should prop up joint partnership approach between the public and private sector to boost investment, creation and innovation of new products, minimising risk and maximising profit, and also job opportunity may be accelerated. SMEs in Bangladesh should generate added inputs towards sustainable economic development. They should take initiatives to help small entrepreneurs enhance their business skills, marketing and financial management. Dependency syndrome should be removed through arranging access to capital and creation of wealth.
To develop an environment of entrepreneurship in Bangladesh, small business ventures should get priority. Non-farm activities have been initiated by different non-governmental organisations. Besides, the government is also trying to develop an infrastructure for small business organisation. Financial institutions are also trying to provide loan to the small business venture. According to Bangladesh Arthanaitic Samikhya (2007), the small and cottage industries sector during the financial year 2005-06 were given funds from BSCIC commercial banks and financial institutions. Taka 21110.73 crore was made available to them, out of which the amount of long term loan was Taka 701.43 crore.
Contribution of Small and Cottage Industries in Bangladesh as a percentage of GDP is very much significant though medium to large industries are also contributing.
Microcredit programmes that the NGOs operate are, otherwise, aimed at alleviating poverty, but the rate of interest is too high. Absence of corporate social responsibility is one of the causes for the recent violent movement in the garments sector of Bangladesh.
Women entrepreneurship must be encouraged to get assistance of banks so that small business enterprises can be developed. Moreover, collateral is also required to obtain loan from the bank, which hampers access to the bank credit. Excess liquidity and relatively high spread between deposit and lending rates in the banking sector are also prevailing. As such a good entrepreneur cannot be encouraged. Lack of corporate governance and corporate social responsibility is prevailing in the society.
Bangladesh should also encourage entrepreneurship in the tourism sector. There are lots of potentialities to develop the tourism sector. During the ancient period, tourists used to visit this part of the world. As that time Bengal was well known for its beauty as well as craftsmanship. But it lost that image with the British rule and later under Pakistan regime. Independence of Bangladesh neither provided any positive image to create Tourism. And, if tourism sector can be explored, it will have positive impact on the country's economy and image. Bangladesh can also increase its GDP by taking appropriate steps from the development of the entrepreneurship in the tourism sector.
Private sector of the country has gone into a shift of paradigm. For development of legal framework and proper fiscal and monetary policy, modern banking mechanism and adequate power generations are essentially needed. Moreover, public and private partnership should be developed so that entrepreneurs of the country can be able to contribute to the economic development.
The problem lies with psychological and behavioral pattern of the society. The society itself is not capable to encourage the entrepreneurs in true sense. Moreover, the nature of human being in a larger context is individualistic. Corporate social responsibility in this country is not still practiced in true sense. Service sector requires information about the current and prospective customers' needs and demands. As such behavioral and psychological pattern of the society should be changed.
With trail and error, the country can develop entrepreneurs taking all sorts of efforts. They can be able to contribute to the economic progress of the country with vision and mission and add value in the society through their dynamism, synergy and innovativeness.
The writer is a professor and chairman, School of Business and Economics, Atish Dipankar University of Science and Technology, Bangladesh. He can be reached at
e-mail:pipulbd@gmail.com
WHEN the Bangladesh became independent in 1971 entrepreneurship among the local people was limited to only two percent of the total population. It was irony that at that time mostly non-Bengalees were the entrepreneurs. But this part of the world had the glorious history of entrepreneurship in the pre-seventeenth century era. It had Textiles, especially muslin sari, small and cottage industries, shipping industries, gold and silver ornaments, milk products, making of combs and buttons from animal bones, treatment of raw hides, papermaking, sugar, salt industries etc. After the seventeen century the entrepreneurial activities started declining.
Before the birth of independent Bangladesh entrepreneurship was developed mainly by the West Pakistanis in different industrial sectors especially Jute sector. But capital outflowed from this region to the then west Pakistan. Lack of capital and farsightedness of the local people had a lingering bad impact on their life. Almost 98% of the industry, mills, and banks etc. were owned by West Pakistanis and foreigners.
After the independence Bangladesh experienced socialistic economic system during 1972-1975, a kind of mixed economy during 1976-1989 and a free market economy since 1990. After independence of the country, the then government nationalised commercial banks, industries, mills, and factories etc. Savings and investment here were very low. Channeling savings and investment through the formal sector and to expand banking services in the remote areas of the country, nationalisation of the banking sector was one of the major objectives at that time. Bank branches expanded particularly in the rural areas.
However, under the state patronage, industrial activities started. From the year 1976, greater emphasis was given towards private sector and it was largely expedited after 1990. Entrepreneurs also started working different sorts of innovative business ventures. An extraordinary brand of entrepreneurs emerged.
Analysts, argued that in Bangladesh lack of political commitments and absence of healthy environment required for entrepreneurial growth were the discouraging factors.
Lack of entrepreneurship development is one of the reasons hindering the growth of the economy. Entrepreneurship is the main way to develop the country. Half of the total population is women. But they are yet to get the equal opportunity and social empowerment. The country cannot develop its economy without empowerment of women.
After independence of Bangladesh, the then government faced problem in spur industrialisation in absence of an active capital market. Development financial institutions like Bangladesh Shilpa Bank, Bangladesh Shilpa Rin Sangstha and Investment Corporation of Bangladesh worked for industrialisation of the country. Bangladesh Small and Cottage Industries Corporation and export processing zones were created to develop entrepreneurship. Moreover, nationalised commercial banks also took special initiatives to provide industrial credit. Capital market again started working from 1976. But it could not work properly. Moreover, the debacle in the capital market in 1996-97 was the resultant factor of widespread manipulation and irregularities in the stock market.
Meanwhile, the global financial crisis has a negative impact on the domestic economy of the Bangladesh, which leads to shutdown of many small and medium industries of the country. However, within the next fifteen to twenty years the behavioral and psychological pattern of the country will change.
Entrepreneurial activities may work as impetus to economic development process of the country.
The government of Bangladesh has undertaken a number of initiatives in terms of monetary and fiscal related policies and approaches, and tried to implement plans to promote Small and Medium enterprises (SMEs), so that economic advancement of the country is made.
In Bangladesh, an entrepreneur's equity fund has been established in 2000, which provides equity to SMEs in agro-based industry and ICT sector through the commercial banks.
As the prime public sector institution for the promotion and development of small and cottage industries in the country, the Bangladesh Small and Cottage Industries Corporation (BSCIC) is involved in lending programmes from own resources, in association with the Bangladesh Shilpa Bank (BSB); and in association with consortium of commercial banks. Most of its policies are based on government experience in this sector.
Bangladesh Small Industries and Commerce (BASIC) Bank Limited was set up in 1988 with the objective of financing small and cottage industries and it is envisaged that at least 50 percent of its loanable fund should be invested in small scale industries. The bank offers lower lending rates to SMEs compared with other banks. At present, the development of the SME sector is increasingly promoted through the involvement of private agencies, such as MIDAS. MIDAS has recently increased its lending limit to Tk. 100 million. Moreover, export promotion zone is also playing a vital role in development of export-oriented industries.
SMEs sector should prop up joint partnership approach between the public and private sector to boost investment, creation and innovation of new products, minimising risk and maximising profit, and also job opportunity may be accelerated. SMEs in Bangladesh should generate added inputs towards sustainable economic development. They should take initiatives to help small entrepreneurs enhance their business skills, marketing and financial management. Dependency syndrome should be removed through arranging access to capital and creation of wealth.
To develop an environment of entrepreneurship in Bangladesh, small business ventures should get priority. Non-farm activities have been initiated by different non-governmental organisations. Besides, the government is also trying to develop an infrastructure for small business organisation. Financial institutions are also trying to provide loan to the small business venture. According to Bangladesh Arthanaitic Samikhya (2007), the small and cottage industries sector during the financial year 2005-06 were given funds from BSCIC commercial banks and financial institutions. Taka 21110.73 crore was made available to them, out of which the amount of long term loan was Taka 701.43 crore.
Contribution of Small and Cottage Industries in Bangladesh as a percentage of GDP is very much significant though medium to large industries are also contributing.
Microcredit programmes that the NGOs operate are, otherwise, aimed at alleviating poverty, but the rate of interest is too high. Absence of corporate social responsibility is one of the causes for the recent violent movement in the garments sector of Bangladesh.
Women entrepreneurship must be encouraged to get assistance of banks so that small business enterprises can be developed. Moreover, collateral is also required to obtain loan from the bank, which hampers access to the bank credit. Excess liquidity and relatively high spread between deposit and lending rates in the banking sector are also prevailing. As such a good entrepreneur cannot be encouraged. Lack of corporate governance and corporate social responsibility is prevailing in the society.
Bangladesh should also encourage entrepreneurship in the tourism sector. There are lots of potentialities to develop the tourism sector. During the ancient period, tourists used to visit this part of the world. As that time Bengal was well known for its beauty as well as craftsmanship. But it lost that image with the British rule and later under Pakistan regime. Independence of Bangladesh neither provided any positive image to create Tourism. And, if tourism sector can be explored, it will have positive impact on the country's economy and image. Bangladesh can also increase its GDP by taking appropriate steps from the development of the entrepreneurship in the tourism sector.
Private sector of the country has gone into a shift of paradigm. For development of legal framework and proper fiscal and monetary policy, modern banking mechanism and adequate power generations are essentially needed. Moreover, public and private partnership should be developed so that entrepreneurs of the country can be able to contribute to the economic development.
The problem lies with psychological and behavioral pattern of the society. The society itself is not capable to encourage the entrepreneurs in true sense. Moreover, the nature of human being in a larger context is individualistic. Corporate social responsibility in this country is not still practiced in true sense. Service sector requires information about the current and prospective customers' needs and demands. As such behavioral and psychological pattern of the society should be changed.
With trail and error, the country can develop entrepreneurs taking all sorts of efforts. They can be able to contribute to the economic progress of the country with vision and mission and add value in the society through their dynamism, synergy and innovativeness.
The writer is a professor and chairman, School of Business and Economics, Atish Dipankar University of Science and Technology, Bangladesh. He can be reached at
e-mail:pipulbd@gmail.com