The contribution of the small and medium enterprises (SME) to Bangladesh’s GDP stood at 30 percent while they generated 85 percent employment in the country. Industries adviser Adilur Rahman Khan disclosed the information, according to a report published in the Bangladesh Post.
SMEs play a very important role in most economies, particularly in developing countries. They stimulate innovation, encourage entrepreneurship and play a vital role in diversifying economies, fostering competitiveness and providing resilience in the face of economic hurdles. SMEs represent about 90 percent of businesses and more than 50 percent of employment worldwide. Formal SMEs contribute up to 40 percent of GDP in emerging economies. These numbers are significantly higher when informal SMEs are included, according to the World Bank.
In Bangladesh, SMEs consist of Cottage, Micro, Small and Medium Enterprises (CMSMEs), constituting a significant portion of the industrial landscape. Bangladeshi SMEs are a unique combination of tradition and innovation. Many businesses take advantage of the country's skilled workers to make unique handcrafted products, while the family-run model nurtures a strong work ethic and adaptability. Such SMEs are resourceful, employing local materials and innovative methods, becoming tech-savvy and using social media to reach a worldwide audience. This combination positions them for exciting future growth.
Though CMSMEs are the driving force behind economic activities in Bangladesh, the sector still faces problems in managing such businesses. The main challenges of this sector are lack of proper information, lack of business diversification, minimum access to infrastructure, lack of opportunity for research, and the biggest one is lack of access to finance.
Lack of business diversification, like limited market access, concentration on the local market, and single products a big hurdle for the SMEs of Bangladesh.
Lack of access to finance is one of Bangladeshi SMEs' biggest hurdles in conducting business operations and in scaling up. Roughly 20 percent of total loans by banks go to SMEs, with 9 percent of total trade finance going to them. CMSMEs use unskilled or semi-skilled personnel and participate less in training programmes like those imparting product-specific manufacturing skills, bookkeeping skills and management skills, owing to funding constraints, which lowers productivity.
To unlock the global potential of SMEs, Bangladesh requires a comprehensive strategy, incorporating the following measures such as access to finance, technological transformation, product diversification, focus on exports and global markets and need-based training.
Access to finance is essential to incorporate policies for unbanked and underprivileged cottage and micro-enterprises to make them bankable. Upon recommendation from the appropriate trade bodies, banks may offer loans to MSMEs without collateral.
By integrating technology, organisations can not only broaden their market presence but also optimize processes and increase productivity. Regulatory compliance, like getting licenses and paying fees, should be enabled online as well.
Bangladesh needs to work harder for diversification from traditional and conventional products.
The country needs to focus on the export market and think globally. Product-related training programmes should be coordinated, and funds from the government and intentional donor may be allocated for such targeted programmes.
According to estimates of the World Bank, 600 million jobs will be needed by 2030 to absorb the growing global workforce, which makes SME development a high priority for many governments around the world. Bangladesh, as an overpopulated country, should consider the World Bank’s estimation a clarion call regarding unlocking the global potential of SME.
