SMEs as engine of economic growth

Currently the country's agriculture is dominated by small and marginal farmers. The large and medium farmers are almost in the process of leaving agriculture as a source of livelihood. On the other hand, small farmers are facing many non-land constraints such as lack of access to credit market, extension services, low prices for produces, lack of knowledge of crop diversification and marketing chain and so on. It is high time to give proper attention to the agricultural sector. Without developing agriculture, any dream of becoming an industrialised country will be illusive. Agriculture provides industries with raw materials. It is highly possible for Bangladesh to achieve industrialisation through agriculture-based small and medium enterprises (SMEs). Proper motivation and investment will be able to flourish the SMEs here.
SMEs are recognized as an engine of economic growth worldwide. To achieve high and sustained economic growth, a triggering force is necessary for coming out of endemic poverty and socio-economic deprivation. SMEs could play a big role in attracting the educated middle class to the agricultural sector. Once the educated people take up agriculture as a vocation and introduce scientific method of cultivation, it will definitely expedite the development of agriculture. First of all, the middle class must have access to the local formal sector financial institutions. Thus a scope is created for the commercial banks to offer banking facilities to the 'missing middle class' by offering them credit and other facilities.
Agricultural production needs to increase by 70 per cent by 2050 in order to feed the world, while demographic growth, climate change, and urbanisation put pressure on available cultivable land. For a low income country like Bangladesh, agriculture sector is vital for economic growth as it provides about 80 per cent of total employment and around 18.64 per cent of GDP. Increased agricultural productivity can enhance food security, reduce poverty, create jobs, and ensure economic growth.
The country's agro products enjoy demand from foreigners and non-resident Bangladeshis and other Asian nationals mostly residing in the Middle East, Europe and the United States.  In the July-August period of the current financial year Bangladesh exported agro-products worth over $104.06 million which is 14.31 per cent higher than the corresponding period of last year. To widen the export basket, FBCCI has placed a proposal to the government for providing cash incentive to 37 more agricultural products, which is under scrutiny by the government.
The Indian state of Gujarat has performed considerably well in the agriculture sector. The strategy of the Agriculture Development Fund (ADF) was changed to enable it to lending funds directly to small and medium enterprises in the agricultural sector. India looks at SME as an 'employment generating machine' and 'the driving force for industrialisation'.
Taking into consideration the success of Gujarat, Bangladesh can strengthen SMEs. Since this sector is labour-intensive, it is capable of increasing national income through rapid employment generation. SMEs can also contribute to achieving the Millennium Development Goals, reduce hunger, and ensure gender equality and women empowerment. Such units in Bangladesh need support and incentives for better investments in order to increase agricultural production, improve marketing of commodities.
The Bangladesh Bank has already introduced several schemes and programmes with the aim to flourish and expand SMEs. Refinance scheme funded by the central bank, IDA and ADB has been facilitated for the development of SME sector. Besides, to ensure institutional financial facilities under easy conditions, the central bank has taken diverse steps like opening of 'Dedicated Desk' for SME and 'SME Service Centre' in the banks. Against the backdrop of recent global recession and changing circumstances, it has become essential to include all segments of people in the growth process through facilitating credit to the sectors where less attention has been given specially, in agriculture.

The writer is a Senior Assistant Secretary, Press & Publication section, the Institute of Chartered Accountants of Bangladesh.
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