Big hopes, thin support for SMEs

Tasnuba Akhter Rifa :

The small and medium enterprise (SME) sector – widely regarded as a key pillar of Bangladesh’s economy – is failing to realise its potential due to inadequate patronage, shortage of financing, and limited policy support, experts have warned.

Despite its significant role in job creation, income generation, and poverty reduction, the sector faces persistent structural challenges. Bangladesh currently has about 11.8 million SMEs employing 36 million people – nearly 87 per cent of all industrial jobs. Yet SMEs contribute only 7.35 per cent to GDP, far below neighbouring countries such as India (37 per cent), Pakistan (40 per cent), Sri Lanka (52 per cent), and China (60 per cent).

Economists note that each year, some 2.2 million people enter the labour force, but unemployment remains stubbornly high. According to the Bangladesh Bureau of Statistics, 2.59 million people were unemployed in early 2024, with almost half of bachelor’s degree holders unable to secure work. They argue that greater SME development could absorb much of this pressure. If even 10 per cent of new entrants became entrepreneurs, unemployment could fall substantially.

SMEs are known for reinvesting nearly a third of their profits, creating a multiplier effect in the economy. However, growth is constrained by limited financing, weak infrastructure, low technology adoption, and poor management capacity. Entrepreneurs also face complex taxation procedures, bureaucratic hurdles, security concerns, and extortion.

SMEs are one of the stronger pillars of Bangladesh’s economy and a vital source of sustainable employment. But the funding crisis remains the biggest challenge, said Nasreen Fatema Awal, founding president of the Women Entrepreneurs Association of Bangladesh (WEAB). She noted that the sector has continued to expand despite serious obstacles and argued that the country’s rapid economic progress would not have been possible without SME contributions.

Access to credit remains a central concern. Many small entrepreneurs struggle to secure loans, particularly newcomers. According to Bangladesh Bank, SMEs received Tk 2.83 trillion in loans by late 2024, representing just 19.14 per cent of total lending. This falls short of the central bank’s requirement for 27 per cent of all loans to go to cottage, micro, small and medium enterprises (CMSMEs) by 2029.

SME Foundation Chairperson Md Musfiquur Rahman stressed the need for stronger policy and budgetary backing, noting that only a fraction of enterprises currently benefit from existing programmes. The Foundation has submitted 140 budget proposals to the National Board of Revenue.

Globally, the financing gap is even wider. The World Bank estimates that women-owned SMEs face a shortfall of USD 1.7 trillion in access to funding.