[🇧🇩] Cottage Industry in Bangladesh

[Saif]

Painful development of CMSME startups

The rise of startups within the cottage, micro, small, and medium enterprise (CMSME) sector has been a bright spot for the economy in recent years. This CMSME sector remains the backbone of economic growth and job creation as it accounts for roughly 30 per cent of the country's GDP and employs near

thefinancialexpress.com.bd

Painful development of CMSME startups

FE
Published :
Jun 01, 2025 00:05
Updated :
Jun 01, 2025 00:05

The rise of startups within the cottage, micro, small, and medium enterprise (CMSME) sector has been a bright spot for the economy in recent years. This CMSME sector remains the backbone of economic growth and job creation as it accounts for roughly 30 per cent of the country's GDP and employs nearly 85 per cent of its industrial workforce. What's worrying, however, is that a concerning number of new businesses in this industry don't make it past their first year or two in operation. There is a clear gap between the sector's promise and performance as a result of this high rate of attrition, which prevents the sector from reaching its full potential. This fragility lays bare the unique challenges that startups in the country must grapple with.

One major obstacle that causes many CMSMEs to fail early is their inability to identify and reach target markets. Far too often, entrepreneurs rely on outdated, word-of-mouth promotion while neglecting the potential of digital tools. Many also lack a firm grasp of key business fundamentals such as branding, pricing strategies, consumer behaviour and effective packaging design. In an increasingly competitive market, this limits their reach and customer engagement. Moreover, insufficient budgets for advertising and promotion further marginalise their products in both domestic and international markets. While the SME Foundation has made commendable efforts by organising fairs and facilitating participation in international trade exhibitions, these initiatives simply aren't enough to address the deeper structural gaps in entrepreneurial capacity and market knowledge. Even the most innovative ventures will struggle to evolve into sustainable enterprises when they lack strong connections to the market.

Another significant challenge is the absence of tailored institutional support and policy frameworks. In a labour-intensive economy like Bangladesh's where formal employment opportunities are scarce, strengthening CMSMEs can drive inclusive growth, reduce poverty and enhance women's economic participation, especially as women represent 6.47 per cent of SME entrepreneurs. However, these businesses are often left to weather the storms of market competition without adequate support. Institutional training in business skills, marketing and customer engagement is notably absent. Moreover, the existing Competition Commission has done little to curb the dominance of large enterprises, further weakening CMSME competitiveness. Some government initiatives such as refinancing schemes and credit guarantees show promise but their full impact is yet to be realised. For example, the disbursement of stimulus packages has fallen short of targets in later phases and the sector's overall contribution to GDP remains stagnant compared to some neighbouring countries. This suggests a notable disparity between policy objectives and their execution on the ground.

To reverse the tide of early business failures and boost growth, the government must attend to the issues that held back CMSME sector from thriving. Entrepreneurs need continuous, practical training in core business skills, tailored to industry needs and delivered through accessible platforms like online courses and community workshops. Policy support must also be streamlined to ease access to raw materials and strengthen market linkages at the grassroots level. As proposed by industry leaders, establishing dedicated SME product exhibition centres would create vital spaces for showcasing products and direct interaction with buyers. Furthermore, effective enforcement of the Competition Law 2012 and strengthening the Competition Commission are crucial to ensure a level playing field and prevent large industrial groups from crowding out smaller enterprises. With the right support in market research, branding and digital integration, it is possible for the country to create an enabling ecosystem that will transform its CMSME industry into a lasting driver of employment and growth.​

 

[Saif]

Multiple factors impede MSMEs’ growth

Bangladesh's highest job creating small and medium enterprises has been showing a grim picture over the last few years as their production shortfall is casting a long shadow over the nation's employment landscape, analysts said on Saturday. The decline, exacerbated by a confluence of economic pres

thefinancialexpress.com.bd

Multiple factors impede MSMEs’ growth

FHM Humayan Kabir
Published :
Jun 01, 2025 00:33
Updated :
Jun 01, 2025 00:33

Bangladesh's highest job creating small and medium enterprises has been showing a grim picture over the last few years as their production shortfall is casting a long shadow over the nation's employment landscape, analysts said on Saturday.

The decline, exacerbated by a confluence of economic pressures and systemic challenges, is hindering job creation and, in some cases, leading to job losses across a sector that is a vital engine of employment in the country, they said.

The Micro, Small and Medium Enterprises (MSMEs) are a cornerstone of Bangladesh's economy, accounting for an estimated 90 per cent of industrial units and 80 per cent of industrial employment.

The MSMEs, contribute 7.17 per cent to the Gross Domestic Product (GDP), and play a crucial role in job creation, poverty reduction, and inclusive growth, especially for women and youth.

However, recent data from the Bangladesh Bureau of Statistics (BBS) indicates a slowdown in factory output growth, with estimates showing a drop to a mere 5.07 per cent for the fiscal year (FY) 2023-24, significantly lower than previous years.

High production costs, erratic energy supply, a surging dollar, and escalating interest rates have forced many MSMEs to operate below capacity or even shut down, threatening to reverse hard-won gains in job creation, insiders said.

An estimated 85-per cent employment of the country is created in the informal sector, which mostly deals with MSMEs.

Economists say lower growth in SMMEs means slim employment generation as these industries are the country's top generator of jobs.

Since MSMEs are the backup industry for larger ones, their production fall will ultimately affect manufacturing at bigger industries too, they add.

The Bangladesh Labour Force Survey-2022 shows an estimated 60-million people, who constitute 84.9 per cent of the total working population here, are engaged with the informal employment.

According to a recent data by the BBS, the year-on-year industrial production growth rate in MSMEs lowered to only 5.07 per cent in FY2024.

The rate was lower than that in the previous two consecutive fiscals of FY2022 and FY2023.

According to the MSMEs industrial production index, the FY2022 growth was 15.39 per cent and that in FY2023 was 9.03 per cent, according to the BBS.

According to the BBS, the country's unemployment rate rose to 4.49 per cent during July-September quarter of the year 2024 from that of 4.07 per cent in the same period a year earlier.

The political turmoil and security concerns took a toll on the production at the SMMEs resulting in an impact on the labour market.

The Bangladesh's unemployed people has been reached to 2.66 million in the third quarter of last year, an increase of 0.17 million from a year earlier.

Of the total unemployed population, jobless men accounted for 1.79 million, up from 1.64 million in the same period the previous year, while the number of unemployed women reached 0.87 million, compared with 0.85 million a year earlier, the BBS statistics showed.

Anam Ahmed, a furniture enterprise owner at capital's Shewrapara area, told the FE that their production has been dropped over the last few years as the demand for home-decors has fallen.

"We could sale nearly 250-300 units of furniture per months even before two years ago. Now it has fallen below 200 units. So, I have cut the productions at my factory," he added.

Two years back, some 30 people were working at my factory which now dropped to only 16, Mr Anam said.

Under MSMEs, the production of machinery and equipment has dropped drastically as it marked 45.55-per cent negative growth in FY2024, BBS data showed.

Machinery and equipment output maintained positive growth in FY2022 and FY2023.

The production of wood-made goods and corks, printing and reproduction of recorded media, chemicals and chemical products; pharmaceutical products and preparations, computer, electronic and optical products, and transport equipment posted negative growth in FY2024.

Dr Zahid Hussain, a former World Bank economist, said that a gradual fall in demands has affected the production of MSMEs domestically.

The several factors including the political uncertainty, security challenges and economic and financial sector vulnerabilities are the key reasons on the way to the growth at the MSMEs, he added.

"The month-on-month real wage has been declining in the last couple of years. Thus, the purchasing power of people has fallen. So, the demand for MSME products has dropped," the economist added.

Since the demand has dropped over the years, production at smaller and medium industries has ultimately declined, said Dr Hossain.

He urged the government to supply seamless power and gas, formalise smaller manufacturing sectors and subsectors, ensure internal and external markets, and cut the inflationary pressure with intent to boost production at CMSMEs.

Policy Exchange Bangladesh Chairman Dr Masrur Reaz said as the highest number of jobs is created by MSMEs in Bangladesh, their lower growth might affect the employment.

If the trend continues, Bangladesh's employment will shrink further and people will fall behind the poverty line, he said. As these sectors are the backup industry for large manufacturers, their recovery is needed, the economist added.

"Most of the cottage, micro and small industries in Bangladesh are set up on an informal basis. They should be brought under the formal system in a bid to upgrade their capacity to create decent employment," Mr Reaz said.

Anwar Hossain Chowdhury, Managing Director of the SME Foundation told the FE that the Covid, flood in last year, July-August uprising had mainly affected the growth and production in the SMEs.

If the SMEs are affected, the employment generation as well as the country's development would be hindered, he added.

"The government would have to provide more loans and facilities to the SMEs for their recovery and flourish. Besides, the market linkage, supportive role of the big corporate to the SMEs and facilitation of the technological innovation are imperative to develop the sector," Mr Chowdhury said.​

 

[Saif]

Bangladesh to observe World Accreditation Day with focus on empowering SMEs

CA calls for global action to empower SMEs

www.thedailystar.net

Bangladesh to observe World Accreditation Day with focus on empowering SMEs
CA calls for global action to empower SMEs

Photo: PID

Chief Adviser Professor Muhammad Yunus has called for a collective global initiative to support small and medium enterprises (SMEs), as Bangladesh prepares to observe World Accreditation Day 2025 tomorrow alongside other nations.

According to a statement issued from the Press Information Department (PID) today, this year's theme is "Accreditation: Empowering Small and Medium Enterprises (SMEs)."

"This year's theme of the day appears to me as time befitting," he said, adding that the accreditation system plays a vital role in supporting SMEs by ensuring quality across all levels of the product and service supply chain.

In his message, the chief adviser said he is pleased to know that Bangladesh is participating in the global observance of World Accreditation Day.

"A large part of our gross domestic product (GDP) comes from the SME sector. The role of this sector is also very important in creating new jobs,' he added.

However, the chief adviser acknowledged that SMEs face ongoing challenges such as entry barriers to international markets, evolving consumer demands, and financial limitations.

"A collective global effort is needed to overcome these obstacles," he said.

The chief adviser further said the Bangladesh Accreditation Board, since its inception, has been working towards these goals.

"So far, the board has awarded accreditation to 155 organisations -- including laboratories, diagnostic centres, certification bodies, and inspection bodies -- according to international standards," he said. He also reaffirmed the interim government's commitment to the development of small and medium industries, saying it is "sincere about supporting sustainable industrialisation, trade, and investment for the country's desired development."​

 

[Saif]

Digital finance & policymaking for MSME resilience

Micro, Small, and Medium Enterprises (MSMEs) are the driving force behind many of the large economies worldwide. While their presence serves as a hub for entrepreneurship development in countries like Bangladesh, most of them struggle to access finance. This lack of access hinders their ability to

thefinancialexpress.com.bd

Digital finance & policymaking for MSME resilience

Md Helal Uddin and Sanjoy Pal
Published :
Jun 16, 2025 23:50
Updated :
Jun 16, 2025 23:50

Micro, Small, and Medium Enterprises (MSMEs) are the driving force behind many of the large economies worldwide. While their presence serves as a hub for entrepreneurship development in countries like Bangladesh, most of them struggle to access finance. This lack of access hinders their ability to sustain growth and ensure success, even when they have the potential for a significant positive impact. Enterprise data and access to necessary funding can be effectively integrated into digital finance platforms. Digitisation of financial services helps banks or financial institutions transform their financing processes. The advancement of financing process innovation has entered a new era through the utilisation of digital technology, where both borrowers and financiers can benefit from credit scoring–based assessment processes. The credit scoring method evaluates a prospect in the shortest possible time, allowing prospective borrowers to know their scores and the assessment criteria on which the lending amount is determined. In this system, prospects are aware of the indicators on which they have been evaluated and scored.

The platform of Industry 4.0 incorporates digital lending as part of embedded finance for financiers. As a component of embedded finance, digital credit scoring involves machine-based processes that help minimise time and costs compared to conventional credit scoring methods. Almost all countries around the world use credit scoring methods to assess individuals and micro or small businesses for loans to meet their liquidity needs. Some rely on traditional credit scoring methods, while others implement digital credit scoring systems. Traditional methods involve collecting data physically and relying on paper-based documents, as the necessary digital infrastructure is not yet in place. In such cases, financiers often rely on visual assessments of prospective borrowers to judge their creditworthiness. This approach entails high costs and significant time to serve borrowers. As a result, borrowers are sometimes denied the necessary funds and may remain unaware of the reasons behind the rejection. In contrast, the digital ecosystem – comprising technology, channels, customers, strategy, and culture – has made life easier for all stakeholders.

According to LeewayHertz, an AI development company, AI-based credit scoring enables creditors to make informed lending decisions by evaluating the creditworthiness of prospective borrowers. They identified several areas where AI-based credit scoring is applied—not only in credit assessment, determining loan interest rates, and setting credit limits for individuals and small businesses, but also in determining insurance premiums, risk management, portfolio analysis, financial planning, counselling, behavioural analysis, customer segmentation, internal and regulatory compliance, credit score simulation, default risk prediction, early warning signals, peer-to-peer lending, and financial health monitoring. These applications are briefly outlined below:

AI-driven credit scoring is one of the most effective approaches to digital credit scoring. Here, AI algorithms uncover a multitude of available data about a prospect through numerical representation. The scoring mechanism considers factors such as credit transaction history, credit utilisation, search history, web activity, and interests to assess a prospect’s financial behaviour by analysing data retrieved from credit bureaus.

The final score, derived from the multiplication of weightings with individual components, enables a lender to determine the credit limit, loan terms, interest rates, tenure, repayment methods, and more. AI-driven credit scoring also utilises alternative data drawn from social media profiles, online shopping behaviour, utility payments, educational background, and other sources. In contrast, conventional methods rely on primary data to evaluate a prospective borrower’s creditworthiness, such as physical site visits, face-to-face interviews, direct net worth calculations, stock verification, and so on.

These differences reflect the intricacies of AI-based credit scoring. In traditional financing methods, lender bias may lead to both over-financing and under-financing of a borrower—each carrying significant risk for an organisation. Data manipulation is easier in conventional systems, whereas the integrity of alternative data in digital systems is more secure and less prone to tampering. This ensures greater accuracy in finalising credit structures and loan terms, thus helping reduce the financing gap.

In this system, borrowers can also be informed of the specific reasons behind credit limit determinations. Through data integration, AI-based credit scoring alerts borrowers about the usage of borrowed funds, thereby controlling non-performing activities. Under a digital ecosystem, borrowers are aware that all information gleaned from them is used to generate alternative data. By providing this data, technology drives global interconnectivity. As a result, investors can gain a competitive edge in the global marketplace.

In developing economies worldwide, there are numerous MSMEs that significantly contribute to employment creation, value addition, economic resilience, innovation, and competitiveness—both domestically and globally. The best outcomes from this sector depend on the vitality of a robust and competitive MSME environment.

To ensure the sustainability of MSMEs in Bangladesh, the government should formulate innovative policies to enable entrepreneurs to operate competitively within a digital landscape. Simultaneously, access to finance must be ensured through banks and non-bank financial institutions (NBFIs). Inclusion will be enhanced when MSMEs operate under a digital ecosystem, which will, in turn, strengthen the availability and reliability of alternative data. By doing so, financiers will be able to assess MSMEs more efficiently, leading to quicker lending decisions—enabled by the digitalisation of financial services, or digital finance. At this point, it is imperative to generate innovative ideas and implement comprehensive policies at entrepreneurial, institutional, and economic levels to make the MSME sector more vibrant and future-ready.

Dr. Md Helal Uddin is the Secretary General of Bangladesh Chamber of Industries (BCI), and Sanjoy Pal is a seasoned banker and Financial Modeling & Valuation Analyst (FMVA®) certified from Corporate Finance Institute, Canada.​