[🇧🇩] Cottage Industry in Bangladesh

[Saif]

Strategic growth for thriving cottage industry

The country's cottage industry, recognised as the backbone of small entrepreneurs and rural employment, has long suffered due to various challenges, primarily stemming from a lack of structured data. Until recently, there was no comprehensive database detailing the sector, which hindered effective

thefinancialexpress.com.bd

Strategic growth for thriving cottage industry
Wasi Ahmed
Published :
Mar 26, 2025 00:16
Updated :
Mar 26, 2025 00:16

The country's cottage industry, recognised as the backbone of small entrepreneurs and rural employment, has long suffered due to various challenges, primarily stemming from a lack of structured data. Until recently, there was no comprehensive database detailing the sector, which hindered effective planning at both the macro and micro levels. The absence of a structured database has long impeded the planned growth of this sector.

Recognising this gap, the Bangladesh Bureau of Statistics (BBS) conducted an extensive field survey some time ago to compile a detailed database on the cottage industry. The survey captures crucial aspects such as the overall characteristics of different sub-sectors, regional variations, and specific challenges facing cottage industries across the country.

According to the survey, Bangladesh has a total of 830,000 cottage industry units, employing over 29 million workers. An encouraging aspect is that nearly 97 per cent of these units operate throughout the year, indicating the resilience and sustainability of the industry. The survey also highlights that the sector contributes significantly to the economy, producing goods worth approximately Tk 395.38 billion annually, with a value addition of about Tk 314.86 billion.

A striking feature of the survey findings is the geographical distribution of cottage industry units. Around 56.3 per cent of these units are located in rural areas, with 20 per cent situated at the homesteads of their owners. This underscores the sector's role in supporting rural livelihoods and sustaining employment opportunities outside urban centres.

However, there are also some concerning findings. The survey reveals that approximately 16 per cent of the workforce employed in the cottage industry does not receive any wages, as they consist of family members engaged in the production process. The lack of wage recognition renders their labour unproductive in terms of economic measurement since it is not accounted for in the manufacturing cost structure. This issue needs to be addressed to ensure that family labour is appropriately valued and contributes to the financial stability of cottage industry workers.

The highest concentration of cottage industry units-around 30 per cent-is found in the Dhaka division, while the lowest is in the Sylhet division. Despite their diverse manufacturing processes, these industries commonly face fundamental challenges that limit their growth potential. One of the key issues is the definition of cottage industries in the government's industrial policy, which many believe is outdated and restrictive.

Under the current definition, a cottage industry is characterised as a unit employing no more than ten workers and operating with a capital of less than Tk 500,000. This definition fails to capture the evolving nature of cottage industries, particularly in the age of technological advancements. By setting strict limitations on workforce size and capital investment, the definition inadvertently discourages growth and scalability. As a result, a large proportion of cottage industry units remain unregistered with relevant government agencies such as the Bangladesh Small and Cottage Industries Corporation (BSCIC) or local government bodies, reflecting the industry's lack of reliance on state support mechanisms. This lack of registration limits their access to financial assistance, technology transfer, training programmes, and other essential resources that could enhance productivity and competitiveness.

The overall scenario of the cottage industry remains chaotic due to these structural and operational challenges. However, there are opportunities to organise and strengthen the sector through systematic interventions. A key strategy could be the establishment of support programmes focused on product development, diversification, and adaptation for both domestic and export markets.

Technology transfer is another crucial area for improvement. Many cottage industry units still rely on outdated tools and traditional production methods, limiting their efficiency and quality standards. Introducing modern equipment and innovative techniques can significantly boost productivity and enhance the market appeal of cottage industry products. Additionally, the use of improved raw materials and production inputs can lead to better product quality and higher profit margins.

Access to credit remains a major constraint for cottage industry entrepreneurs. Government policies should facilitate credit access tailored to the specific needs of small-scale producers. If the authorities, particularly the BSCIC, actively monitor and support the activities of this vast yet disorganized sector, credit facilities can be structured to provide meaningful assistance. Many cottage industry entrepreneurs struggle with securing loans due to the lack of collateral or formal business registration. Addressing these issues through financial inclusion initiatives can empower small entrepreneurs to expand their businesses and improve their livelihoods.

A holistic approach is necessary to transform the cottage industry into a well-organised and thriving sector. Policymakers should revise the existing definition of cottage industries to reflect the changing dynamics of small-scale production and entrepreneurship. Encouraging formal registration through incentives, rather than mandates, can help integrate cottage industry units into mainstream economic activities while allowing them to retain their operational flexibility.

Marketing support is another critical area that requires attention. Many cottage industry products have strong potential in both domestic and international markets, but limited market exposure prevents them from achieving higher profitability. Establishing dedicated platforms for cottage industry products, such as trade fairs, online marketplaces, and branding initiatives, can help entrepreneurs reach a broader customer base.

Furthermore, skill development and training programmes tailored to the needs of cottage industry workers can enhance productivity and innovation. Training in areas such as business management, financial literacy, and modern production techniques can equip entrepreneurs with the knowledge and skills needed to scale their businesses sustainably.​

 

[Saif]

Developing roadmap for MSMEs' digital transformation

Digital transformation is the transition of process-flow from manual to digital intervention in enterprise management. The world economy is moving towards embracing the digital transformation in every sphere of business practices. The majority of business entities in the global market are Cottage,

thefinancialexpress.com.bd

Developing roadmap for MSMEs' digital transformation
Sanjoy Pal
Published :
Apr 27, 2025 22:43
Updated :
Apr 27, 2025 22:43

Digital transformation is the transition of process-flow from manual to digital intervention in enterprise management. The world economy is moving towards embracing the digital transformation in every sphere of business practices. The majority of business entities in the global market are Cottage, Micro, Small and Medium Enterprises (CMSMEs) and the ASEAN region accounts for most of them. ASEAN Investment Report in 2022 revealed that, more than 97 per cent of enterprises in the region are MSMEs. They account for 67 per cent of employment in the region, an average of about 28 per cent of gross value added, about 20 per cent of export revenues and about 45 per cent of GDP. It has also been exposed that, three member states (Singapore, Indonesia and Malaysia, in that order) account for 83 per cent of start-ups that have raised more than $1 million in funding in the region.

The pursuit of process reengineering from product innovation to procurement and sales is increasing their arena through utilisation of digital means day by day. As part of process automation for accounting, inventory management, invoicing etc. different technologies such as digital devices, business management software are also being integrated. But, there are some barriers noticed to accept the process automation by MSMEs, where the limited skills and knowledge to use the software, human resource constraints, the cost of procurement of digital tools, cost of software set up, cost of operations of the automation are common. Sometimes, the income they earn from their business does not commensurate the transformation cost incurred. As a result they are getting rid of embracing the digital transformation in easiest way.

Bangladesh Bank, the central bank of Bangladesh, has taken a timely initiative by reviewing the Master Policy on CMSME financing, which includes the trading sector under the medium enterprises category and recognizes marginal enterprises possessing UBID (Unique Business Identification) or DBID (Digital Business Identification) as per the Digital Commerce Operation Guidelines 2021. They have also encouraged the use of Digital Financial Services (DFS) and Mobile Financial Services (MFS) in CMSME financing, along with the development of QR code and chatbot services for CMSMEs. These initiatives help to establish a digital footprint for CMSMEs in Bangladesh. However, they are not yet sufficient for the full development of MSME sector participants.

The integration of digital technology and engagement of MSMEs will get pace if a specific roadmap for the digital transformation can be developed. Some prolific recommendations to sketch the roadmap for digital transformation of MSMEs are pointed out below.

Comprehensive policy on Digital Transformation for MSME. A comprehensive policy on Digital Transformation for MSME must be adopted, where the process, technological investment, employment of skilled manpower, service propositions etc. are to be mentioned. Additionally, the government must develop a Digital Trade Policy and embrace digital trade in international trade services to streamline the trade process in a shorter frame.

Development of Digital Infrastructure. Optimal level infrastructure development such as reliable internet connectivity, easily accessible software management tools for MSMEs must be ensured. Market competitors for software development and management (Automation Company) will be increased to minimise the automated software and tolls installation and management. Notable presence of consultancy firms for MSMEs in the marketplace should be confirmed. Nano loan for procuring digital devices for marginal MSMEs should be launched by the banks that may be repaid by monthly instalments.

Digital Education. An awareness building programme on digital financial literacy for MSMEs should be undertaken. The Technical Training Institute must provide training on Digital Transformation for MSMEs to youths either free of charge or at an affordable cost.

Digital Marketing Techniques for MSMEs. MSMEs solidifying their business footprint through digital platforms like Facebook, Instagram, Tiktok and different sites for e-commerce should be encouraged with tax benefits. Organisations supporting MSMEs should develop training programmes for them in line with international standards.

Incentive for MSMEs and Fintech Developers. The central bank should launch an incentive package to support the financing of MSME transformation. Additionally, an incentive package for financing fintech developers who innovate MSME processes should be implemented. Digitally transformative MSMEs that export their products abroad should be encouraged through concessional duty benefits provided by the government. These measures will motivate MSMEs to contribute more significantly to increasing the country’s foreign reserves.

Investments and Rewards. The Chamber of Commerce and Industries, along with other member organisations, must embrace digital transformation and invest in it to develop marginal MSMEs. They should annually highlight and award the top 10 transforming MSMEs in the category of successful digitally transformative enterprises to encourage visible impacts of digital transformation.

Bangladesh is a country where eagerness to harness technology, openness to innovation, strong growth prospects, and expanding employment opportunities create a favourable environment for economic success. To ensure inclusive benefits, the Fourth Industrial Revolution (4IR or Industry 4.0) also presents numerous prospects for MSMEs, such as boosting efficiency in business processes, accessing global markets, and diversifying customer engagement — all of which can be a strong fit for Bangladesh. By adopting emerging technologies like AI, data analytics, and others, MSMEs can drive innovation and make data-driven strategic decisions more rapidly. Therefore, digital transformation for MSMEs is a blessing for the digital future, not a hazard.

The writer is a banker and certified Financial Modelling & Valuation Analyst (FMVA).​

 

[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."​