There is no denying that small and medium enterprises (SMEs) stand as the backbone of Bangladesh's developing economy, contributing substantially to employment creation, grassroots innovation, rural industrialization, and inclusive growth across both formal and informal sectors nationwide. But what is evidently denied is right understanding of the sector's current needs to tap its modern-day potential.
It comes clear from longstanding experiments with the sector sans a clear vision that, despite their vital role in driving development, SMEs continue to face serious challenges stemming from a lack of context-specific research, weak academic engagement, and a policy environment that often relies on assumptions rather than robust empirical evidence.
Government agencies, donor organizations, and industry forums all regularly organise workshops and consultations on SME development, yet all this rarely translates into sustained research programmes or a deeper institutional understanding of the sector's evolving needs and complexities. This persistent research deficit significantly undermines policy effectiveness, limits the efficient allocation of resources, and prevents the design of long-term strategies that could empower SMEs to thrive in a competitive and technology-driven global marketplace.
Assumption is in no way substitute for research that is sine qua non for dispensing right remedies for giving a fillip to this economic sector. Effective policy must be informed by solid outcome of research that explains how SMEs operate in local environments, what challenges constrain their growth, and which factors determine their survival, resilience, and innovation capacity.
In Bangladesh, SMEs range from micro-scale rural ventures to tech-driven export firms, but policy instruments often treat them as one monolithic group-failing to reflect their diversity or tailor support to their specific operational characteristics. Research enables policymakers to differentiate between growth-ready enterprises and vulnerable subsistence businesses, identifying which segments respond best to interventions such as digitisation, access to finance, training, or export-facilitation schemes.
Without such targeted insights, even well-funded initiatives may fall short, as resources are misallocated, beneficiaries misidentified, and outcomes remain modest compared to expectations set by government or development agencies.
Inconsistent data prevent understanding of SME contribution: The absence of a unified statistical framework continues to create significant discrepancies in official estimates regarding the contribution of SMEs to Bangladesh's gross domestic product or GDP, posing a serious challenge for policymakers attempting to formulate targeted and coherent support strategies.
According to the Bangladesh Economic Review 2024, the industrial sector accounts for 37.95 per cent of GDP, while the draft National Industrial Policy estimates SME contributions alone range from 27 to 30 per cent-a figure that appears inflated when compared to national output data. In contrast, the national budget speech for the upcoming fiscal year claims the contribution of cottage, small, and medium enterprises to be only 11.89 per cent of GDP, further highlighting the gaping inconsistencies across key government publications and reporting tools.
Bangladesh Bureau of Statistics' provisional GDP calculations suggest small, medium, and micro industries contribute just 7.17 per cent, with cottage industries adding 4.57 per cent, although these figures do not account for SME activity in agriculture and services.
The problem is compounded by the discontinuation of critical BBS surveys, including the Annual Establishment Survey and Informal Sector Survey, which are essential for measuring the CMSME footprint where over 86 per cent of the national workforce is engaged.
Inconsistent definitions and the need for data harmony: Bangladesh has yet to establish a harmonized, widely accepted definition of SMEs, resulting in fragmentation across agencies and complicating efforts to build an inclusive and consistent national strategy for small enterprise development. Institutions use varying criteria, such as employment size, capital investment, or turnover, without taking into account qualitative traits like ownership style, business maturity, or growth orientation that often define a firm's development potential.
The absence of a unified SME definition also inhibits the creation of a central database, leading to serious data gaps that hamper policy design, monitoring, and evaluation of government or donor-led support programmes.
A national SME census, updated regularly and structured around a consistent classification framework, is required to enable more accurate measurement of sectoral performance, regional disparities, and long-term impact of targeted interventions.
Challenging outdated perceptions of smallness: Many still view SMEs as inefficient, informal, and transitional-expecting them to either evolve into large firms or vanish over time-a misconception that overlooks their proven contributions to innovation, flexibility, and localized job creation. Empirical evidence from around the world suggests that SMEs, when properly supported, can function as stable, value-creating businesses without necessarily scaling up, especially in specialized sectors or community-based economies.
In Bangladesh, examples abound-from rural garment workshops and small agri-processors to freelance IT professionals-demonstrating how SMEs adapt quickly, innovate locally, and sustain livelihoods even amid economic or political disruptions.
Shifting the national mindset to value small enterprises on their own merits, rather than as stepping stones to industrial giants, is essential for inclusive, sustainable, and regionally balanced development.
Education: the missing link in SME capacity building: A key reason behind the absence of deep SME research is a lack of SME-specific content in higher education, leaving graduates ill-prepared to engage with small enterprise policy, behaviour, or development strategies in meaningful ways. Universities and business schools rarely teach SME development as a core subject, creating a critical void in the country's intellectual infrastructure and limiting the emergence of informed policymakers and development practitioners.
Introducing SME studies into economics and business curricula, promoting case-based learning, and encouraging student research on local enterprises could build a generation of professionals equipped to engage with sectoral realities. Incentivizing collaboration between academia and industry-through incubators, internships, and research grants-would also stimulate a two-way exchange of knowledge and experience essential to practical, impactful policy work.
Towards a collaborative knowledge ecosystem: Sustainable SME development requires coordinated action across government bodies, financial institutions, academia, private enterprises, and development partners, with each actor contributing insights, expertise, and support to an integrated ecosystem. Establishing platforms for regular dialogue among these stakeholders would help ensure that research informs practice, policy reflects ground realities, and entrepreneurs' voices are included in the strategy-formulation process.
Moreover, SMEs must be engaged not merely as policy recipients but as active participants in shaping interventions, sharing challenges, and identifying what works-and what doesn't-based on their lived business experience.
Digital tools, local SME councils, and innovation forums can serve as bridges between the policy world and enterprise realities, enabling faster feedback loops and more responsive programme designs.
Investing in knowledge for sustainable growth is all the more necessary in turning the corner in this sprawling sector of the economy. As Bangladesh sets its sights on achieving upper-middle-income status, SMEs must be positioned as a central engine of growth-but this will require more than credit schemes, subsidies, or promotional campaigns. To truly unlock SME potential, Bangladesh must invest in research, education, and institutional learning-building a strong foundation of data, analysis, and sectoral understanding that drives smarter, more adaptive policymaking.
Embedding SME studies into universities, strengthening databases, encouraging collaboration, and involving entrepreneurs in shaping policy are essential steps toward a more vibrant, resilient, and inclusive economic future.
Only through such intellectual investments can the country transform its small enterprises from survival-driven units into innovation-led growth engines, contributing meaningfully to national prosperity.
jahid.rn@gmail.com
© 2025 - All Rights with The Financial Express
