The Present Scenario of Smes in Bangladesh

Bangladesh is s developing country. Its per capita income is only $750 and per capita GDP is $684 and present GDP growth rate is 6%. Most of the people are living in the below of poverty line. Poverty as like as curse for our country.

To remove poverty government and other organization such as NGOs, Bank has taken many steps. Bangladesh Government has taken Millennium Development Goals (MDGs) programs that first goals is eradicate extreme poverty and hunger. They also have written Poverty Reduction Strategy paper (PRSP) to remove poverty. To achieve the committed MDGs and PRSP, Bangladesh must strive to expend employment creation opportunities very rapidly. For this government have formed SMEs Foundation. SMEs means Small and Medium enterprises, it can be defined as enterprises which have at most 250 employees and an annual turnover not exceeding 50 million Euros.

Further there is the distinction of Small enterprise- they fewer than 50 staff members and less than 10 million Euros turnover- and micro- enterprises (less than 10 persons and 2 million Euros turnover). Different countries and organizations define SME differently. The government of Bangladesh has categorized SME into two broad classes manufacturing enterprise and non manufacturing activities. Manufacturing enterprises can be divided into two categories Small enterprise and Medium enterprise.

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Non-manufacturing activities also can be divided into two categories Small enterprise and Medium enterprise. According to Bangladesh Bureau of Statistics different enterprises are defined as Micro industry that number of employees is 0-9, small has 10-49 employees, Medium has 50-99 employees and Large above 99 employees. To complete this assignment we have collected data from the secondary source such as internet, books, journal etc. The objectives of the study are to appraise the present situation of SME in Bangladesh, to identify the problems of SME in Bangladesh and recommend solutions to overcome the problems.

Small and Medium Enterprises (SMEs), by producing exportable surpluses of commodities together with local value additions and creation of employment opportunities, can make significant contribution to the economy of Bangladesh. Although financing of SMEs in off-farm rural economic activities are largely dependent on equity financing from personal and family savings, currently banks and financial institutions are also coming forward to provide finance to this sector. As the large potential of employment generation by SMEs has attracted attention of the policy makers, a range of initiatives for channeling loans to SMEs are being taken.

The Government has taken up programs to provide financial assistance to expand SMEs through commercial banks. Alongside the disbursement of loans, since FY2004-05, Bangladesh Bank has taken up a scheme of Tk. 100 crore for refinancing the scheduled banks and financial institutions as revolving fund. Recently, the scheme has been widened with an enhanced allocation of Tk. 600 crore. Up to June 2009, Tk. 716. 44 crore and up to December 2009 Tk. 853. 15 has been disbursed among 17 scheduled banks and 21financial institutions for refinancing potential entrepreneurs.

In addition to this, IDA has provided US$10 million and the Government of Bangladesh has provided Tk. 112. 32 crore through ‘Enterprises Growth and Bank Modernization Project (EGBMP)’. With the stipulated revolving fund of Tk. 224. 50 crore up to June 2009 and Tk. 244. 14 crore up to December 2009 refinancing facilities among 2541 potential entrepreneurs have been provided to 15 schedule banks and 14 financial institutions.

Moreover, in an attempt to provide incentives to the sector, ADB has been providing an additional US$30 million to Bangladesh Bank and Tk. 34. 94 up to December 2009 refinancing facilities among 3264 potential entrepreneurs have been provided to 9 schedule banks and 7 financial institutions. These resources would contribute both in employment generation as well as in enhancing the purchasing power of the poor. It is found that micro enterprises run by up to 10 workers contribute the most which is 86% of the total contribution from SMEs to GDP of Bangladesh. It is also observed that micro enterprises run by more than 21 workers contribute about 7% of total contribution from SME to GDP of Bangladesh.

It is reflected from the table that manufacturing sector contributes the highest contribution in GDP i. e. , 38%. It is also observed from the table that agriculture and wholesale and retail sector contribute more than 22 percent in the GDP of Bangladesh. We also show the growth pattern of SME. It is observed that during 2001-2002 to 2004-2005 in every financial year the growth rate of SME is about 7%. In 2005-2006 the growth rate was 9. 21%. The highest growth was in 2006-2007 i. e. 10. 28%. Quantum Index of Production for Medium to Large Scale Manufacturing Industries in 2009-10 is 431. 51.

We also found some major problems these are Resource scarcity, High employee turnover, Absence of modern technology, Poor physical infrastructure, Financial constraints, Lack of uniform definition, Lack of information, Lack of entrepreneurship skills, Participation of women entrepreneurs, Access to Market and lack of awareness regarding the importance of marketing tool, Bureaucracy, Absence of transparent legal system, Lack of commitment to innovation and customer satisfaction, Lack of quality assurance, Lack of research and development facilities, Fierce competition with the cheaper foreign goods.

We also provide some recommendation that mention in the Recommendation chapter. At last we conclusion our assignment on the conclusion chapter. Small and medium enterprises (SMEs) act as a vital player for the economic growth, poverty alleviation and rapid industrialization of the developing countries like Bangladesh. SMEs are significant in underlying country’s economic growth, employment generation and accelerated industrialization. Government of Bangladesh has highlighted the importance of SME in the Industrial Policy-2005.

SME has identified by the Ministry of Industries as a ‘thrust sector’. As the SME sector is labor intensive, it can create more employment opportunities. For this reason government of Bangladesh has recognized SME as a poverty alleviation tool. SME also foster the development of entrepreneurial skills and innovation. Along with poverty alleviation SME can reduce the urban migration and increased cash flow in rural areas. As a result it will enhance the standard of living in rural areas. Performance of SMEs in Bangladesh is significantly found below the level of international standard.

The MDGs reflect the actions and targets contained in the Millennium Declaration that was adopted by 189 nations during the UN Millennium Summit in September 2000. Bangladesh has made noteworthy progress in the attainment of MDGs during 1990-2000. Bangladesh advancement towards MDGs is evident in human development, for example attainment of gender parity in primary and secondary school enrolment. Mid-way through to the 2015 target of MDGs attainment, Bangladesh has covered significant grounds and can safely be said to be on track in relation to most of the targets.

A midterm review of progress at the aggregate level shows that Bangladesh is making progressive strides in reducing poverty, already bringing down the poverty gap ratio to 9 against 2015 target of 8 with the rate of poverty reduction being 1. 34 percent in relation to the required rate of 1. 23 percent.

The main goals are as following:

Goal 1: Eradicate Extreme Poverty and Hunger

Goal 2: Achieve Universal Primary Education

Goal 3: Promote gender equity and Empower women

Goal 4: Reduce Child Mortality

Goal 5: Improve Maternal Health

Goal 6: Combat HIV/AIDS, malaria and other diseases

Goal 7: Ensure environmental sustainability

Goal 8: Develop a global partnership for development

The scope of additional absorption of labor in agriculture being somewhat limited, the best potential for this lies in the manufacturing sector. To create job space government founded SME Foundation that provide loan and help to established small and medium enterprise. In the context of Bangladesh, the development of Small and Medium Enterprises (SMEs) can be considered as a vital instrument for poverty alleviation and ensure the rapid industrialization.

In this paper we have tried to identify the problems of SMEs of Bangladesh. The performance of SMEs of Bangladesh especially in terms of employee turnover rate, quality assurance, allocation of funds, marketing activities have been found significantly below the international standard. The sector gets negligible support from government. The rate of development of SME is not up to the expectation.

In order to overcome the problems a few suggestions for the development of SMEs are given by us.

This topic SMEs is a very important in the context of Bangladesh.

It help us the gather practical experience and we are to know that the role of SMEs, Problems, prospective and their solution. But we have some limitation; it is we are collected data from secondary source, basically internet using. We do not conduct face to face interview because, time was not enough for us to prepare this assignment. If we got enough time we think it will be help to prepare our assignment.

Government of Bangladesh has highlighted the importance of SME in the Industrial Policy-2010. SME has identified by the Ministry of Industries as a ‘thrust sector’. As the SME sector is labor intensive, it can create more employment opportunities. For this reason government of Bangladesh has recognized SME as a poverty alleviation tool. SME also foster the development of entrepreneurial skills and innovation. Along with poverty alleviation SME can reduce the urban migration and increased cash flow in rural areas. As a result it will enhance the standard of living in rural areas. Performance of SMEs in Bangladesh is significantly found below the level of international standard.

Although government of Bangladesh has taken some initiative to ensure the growth of SME but those steps are not enough at all. But government shows its positive attitude towards this sector. Bangladesh government should continue to give more focuses on some areas, such as arrangement of finance, provide infrastructure facilities, frame appropriate legal framework, establish national quality policy etc. From the sequence of our analysis it seems that for the economic development of Bangladesh SME can play a vital role. We are quite optimistic that if the above mentioned suggestions are implemented then the growth of SME sector in Bangladesh will be accelerated.

References

1. Ahmed, M. U. , Mannan, M. A. , Razzaque, A. , and Sinha, A. (2004). Taking Stock and Charting a Path for SMEs in Bangladesh, Bangladesh Enterprise Institute, Dhaka.
2. Alam, M. S. and Ullah, M. A. (2006). SMEs in Bangladesh and Their Financing: An Analysis and Some Reccomendations. The Cost and Management, Vol. 34, No. 3.
3. Hossain, N. (1998). Constraints to SME Development in Bangladesh, Seminar Proceedings, University of Maryland at College Park, USA.
4. Miah, M. A. (2006). Key Success Factors for National SME Development Program; Lessons for OIC Member Countries from Bangladesh Experience, SME Foundation, Dhaka, Bangladesh.
5. Mintoo, A. A. (2006). SMEs in Bangladesh. CACCI Journal, Vol. 1.
6. Report of Asian Development Bank (ADB). (2002). Strategic Issues and Potential Response – Small and Medium Enterprise Development and Export Expansion. Asian Development Bank (ADB), Dhaka.
7. SME Cell. (2005). Policy Strategies for Development of SME, Ministry of Industries, Government of People’s Republic of Bangladesh.
8. SME Policy Strategies. (2005). Publication of Government of People’s Republic of Bangladesh.
9. Uddin, S. M. N (2008). SME Development and Regional Economics Integration, Seminar Proceedings, Joint Regional Workshop held in Tokyo, Japan.
10. Ahmed, Kashfia & Chowdhury, Tanvir Ahmed (2009). Performance Evaluation of SMEs of Bangladesh, International Journal of Business and Management, Vol. 4 No. 7.

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