[🇧🇩] Cottage Industry in Bangladesh

[Saif]

Source : https://en.banglapedia.org/index.php/Cottage_Industry

Cottage Industry​

Cottage Industry refers to the traditional artisanship of rural people of Bangladesh, who produce various household items with locally available raw materials and artistic skills inherited through ages. For their own use and for livelihood, they make those artistic products by hand depicting the design and motif of the nature of Bangladesh and its people, birds and animals, foliages, plants and trees, rivers, streams and sky. Cottage industry is called a synonym of handicrafts, artistic work in wood and metal, amateur artworks and rural artistry. At present the cottage industry has expanded to urban area.

According to Bangladesh Small and Cottage Industries Corporation (BSCIC), Cottage industry is a small-scale industrial unit run by the members of the same family either on full or part time basis. Its maximum number of workers should be limited within 20; it uses indigenous technology and is not run by power. If it uses power-run machinery, the maximum number of workers should be ten. The national board of revenue (NBR) considers the cottage industry as an industrial unit run by a maximum of 50 workers using local skills without adopting power-run mechanical equipment. The agriculture Census Report of 1983-84 defined the cottage industry as a household level manufacturing unit that produces goods manually. It has been mentioned in the Industrial Policy-2010 that the net asset of a unit of cottage industry without the land and the factory should be less than five hundred thousand taka and its maximum workforce should be ten and they would preferably be family members.

The history of cottage industry is very old. Moroccan traveller ibn batuta (1304-1377) in his travelogue mentioned the world famous product of muslin produced in Bengal which earned appreciation from all over the world for its extraordinary quality. In pre-British Bengal, the cotton industry was organised under the pure handcraft or the domestic system of production. During the Mughal rule in Bengal, Cottage industry used to be patronised by the government. Initially the European merchants and companies, from Britain and Holland, and the east india company, financed the weaver and artisans, and other handicraft makers for producing goods of export quality. Later, the employees of East India Company imposed a series of repressive steps on weavers, artisans and other craftsmen engaged in cottage industries. As a result the export of textile and handloom products reduced significantly. For instance, export earning from fabric, which was 13 million rupees in 1815 declined to one million rupees in 1832 and became nil in the following year. Contrastly, import of foreign made fabric, basically industrial product began in 1832. Only in that year, the East India Company compelled the domestic consumers to buy fabric worth 4 million rupees imported from England. The partition of 1947 caused further damages to the cottage industry in Bangladesh as many Hindu artisans and craftsmen left the country. So a vacuum was created in the trading of cottage industry during the initial stage of Pakistan era. There was no big capital investment in this sector in those days, although there were about 1600 highly skilled professional artisans and four hundred thousand weavers in the then East Pakistan. Handloom and textile products of those people could fulfill the demand of fabric in the local market till 1954, when the united front government took an initiative to revive the small and cottage industries. The East Pakistan Small and Cottage Industries Corporation (EPSIC) were established in 1957 by an Act to this end. During the war of liberation, the entire industrial sector including the cottage industries of Bangladesh was severely damaged. The government of Bangladesh took initiatives to rehabilitate and reorganise the cottage industries as an important sector for enhancing employment opportunities. EPSIC was reorganised and renamed as bangladesh small and cottage industries corporation (BSCIC). BSCIC stared providing financial and technical support and consultancy services to the artisans, craftsmen and entrepreneurs for promoting the traditional techniques beside modern technology. According to a survey conducted by BSCIC in 1981 there were 322 thousand cottage industry units in Bangladesh engaged in producing 160 different types of items.

According to a survey conducted in 2005, there were 7 lakh units of industries in Bangladesh of which large-scale industries were 6000, medium scale 5000, small industries 76, 000 and cottage industries 6 lakh 20 thousand. Earlier, during the fiscal year 1999-2000, 4085 new industrial units including 3240 cottage industries were registered. The total amount of investment in cottage industry in the year was 508 million taka and the sector provided job opportunity to 40 thousand artisans and craftsmen.

Classification of cottage industries According to the international standard of classification of industries, the cottage industries are catagorised into eight groups. These are: (1) Food, drinks, tobacco processing industries: milk products, fruit processing and canning, fish processing and canning, ginger drying, pulse grinding mills, flour mills, rice mills, oil mills, spice grinding factories, bakery, molasses making, fodder and poultry feeds, ice factory, salt plant, catechu making, sweet meat making, honey processing, bidi factory, apiculture, fish farming, poultry farming, flattened and puffed rice making; (2) Textile and leather factories: cotton yarn spinning, sericulture and making of silk products, handloom, cloth printing, zamdani weaving, stitching and embroidery, hosiery, socks and woolen goods making, coconut-coir products, jute yarn and rope making, netting, fishing net making, garments factory, leather processing, leather product making, batik printing, shataranji weaving and carpet making; (3) Timber and wooden furniture industries: boat making, wooden toy and furniture making, cane and bamboo goods and furniture making, sports goods production, musical instruments and hookah making, mat preparing, wood curving, wooden agricultural equipment like plough, house decorating materials and timber by-products making; (4) Printing, packaging and paper industries: recycling of old and wastage papers and making goods therefrom, printing press, book binding, paper based handicrafts, paper bags, paper-made flowers making etc; (5) Chemical and petroleum group of cottage industries:' allopathic, unani and ayurvedic medicine preparation, printing ink and dying industries, paints and polish items, auger and candles, cosmetics, soap factories, shoe-shiners, combs and buttons, pottery and glass factories, chalk making, slate and pencil, plastic toys and bags etc; (6) Non-metallic industries: limestone and snail-based lime, chalk powder and colour chalk, shell crafts including buttons and bracelets; (7) Metallic products machinery and equipment: steel furniture, electroplating, metallic nets, metal plate making and printing, nails, brass and bell-metal utensils, steel tanks, hair clips, machinery and agricultural equipment, electrical goods, jewelry products, light engineering and blacksmiths production and (8) Handicraft products and other cottage industry.


Pottery

Pottery According to a survey conducted by BSCIC, published in a book titled Karupalli in 1985, there were 666 pottery villages in Bangladesh, where about 76 thousand people belong to 18 thousand families had to earn their livelihood from this traditional occupation. The total capital investment in the sector was 106 million taka and goods worth 367.4 million taka was produced during that period. Pottery is a family and community based collective work localised on the basis of availability of row materials. Most of the artisans engaged in this industry hereditarily and most of them belonged to the Hindu community.
Known as kumbhokar (potter or clay-modeller), the title of this caste is pala and they make dolls, statues of gods and goddess, household goods, sculpture, tally, flower vases, pots for offering worship, fancy kitchen pots made of clay. Bijaypur of Comilla, Madanpura of Patuakhali, Champaknagar of Feni, Kartikpur of Shariatpur and Royerbazar in Dhaka are the most remarkable and leading pottery localities.


Cane furnitures

Bambao and cane industries The survey of BSCIC (1985) suggested that 122 thousand artisans were engaged in the country's 42 thousand bamboo and cane crafts making units. At that time raw materials worth 224 million taka were used per year to produce items worth 500 million taka. Major items of this category are cane products, partition, mat, fishing trap, hand fan, sofa set, table-mat, wall-mat, tray, flower vase, ash tray etc and they are mainly produced in Comilla, Sylhet, Chittagong and Noakhali.

Jute goods Sika, a netted product of twisted jute ropes of various indigenous designs and motifs, table mat, shataranji and carpet, fancy handbag and bag of jute are produced in four thousand cottage industries by about eleven thousand craftsmen. Items worth 30.4 million taka were produced per year with the annual investment of 20 million taka.


Textile products

Textile and Weaving factories In 1978, about one million weavers, artisans and workers were engaged in 437 thousand handlooms and pure looms of 198 thousand weaving and textile factories of Bangladesh. The average annual production capacity of these looms was 1045 million yards of indigenous clothing like sharee, lungi, dhuti, muslin, jamdani, katan, malmal and traditional handloom products of different tribes, gamcha, mosquito nets and towels.

Narshingdi, Roypura, Demra, Tangail, Shahjadpur, Bera, Kumarkhali, Magura, Rajshahi, Khadimnagar, Mirgarh and Nasirnagar are very famous places of origin of these products. Fashion and boutique houses are designing and making modern dress from traditional cloths of tribal weavers, muslin, jamdani, malmal taroyo sharee, sharees of Pabna and Tangail origin, Silk and Khadi lengths.


Embroidered Quilt

Embroidered Quilts The most famous stitch work of Bangladesh is embroidered quilts, known as Nakshi-Kantha.

Thirteen different types of high quality Nakshi-Kantha are stitched everywhere in Bangladesh, but those of Rajshahi, Nawabganj, Rangpur, Faridpur and Kushtia are very special in terms of traditional and exclusive design. According to BSCIC, 1500 cottage industries run commercially as promoters of stitch work have 3000 high-class artisans with a production capacity of goods worth 161 million taka per year.


Cool Mat

Cool Mat A special type of mat made by bark of a tree named morta. The mat, very soothing and cool to lie upon, is a traditional craft of Rajnagar, Balagonj, Baralekha and Mollarbazar area of Sylhet, Sonagazi and Raipur of Noakhali, Swarupkathi and Neelgati of Barisal and Shatech of Faridpur. Different designs and motifs of birds, animals and foliage from the nature and environment are portrayed by the artisans beautifully on the mat with red, blue, green, black and violet colours. About 15 thousand artisans produce cool mats of 50 million taka per year. Earlier in this country cool mats were made by silver and ivory.

Ornaments Ornament-making is one of the most fine and remarkable cottage based artisanship belonging to the mainstream anthropological art of Bangladesh. Womenfolk of the country love to increase their physical beauty by wearing fashionable ornaments in various parts of the body. Ornament makers are known as shwarnakar or goldsmith belonging to a particular caste of the Hindu. They had developed designs and motifs of foliage, fruits, flowers, birds, animals and stars mainly being inspired by the nature to make ornaments from generation to generation. According to BSCIC, there are 12,250 ornament-making units and 27 thousand professional goldsmiths in Bangladesh. Gold and silver ornaments of different variety to decorate the forehead and at the parting of the hair (sithi), ear, nose, neck, hand, waist and foot are made in Bangladesh. The leading ornament-making units are concentrated in Dhaka, Chittagong, Comilla, Sylhet and Faridpur region. The capital invested in this sector is estimated by BSCIC as 130 milion taka.


Brass and bell-metal utensil

Brass and bell-metal Cottage industries producing brass and bell-metal utensils are very much involved with the culture and tradition of Bangladesh. Dhamrai and Savar of Dhaka, Nawabgonj, Islampur of Jamalpur, Rangpur, Tangail and Shariatpur are famous for the concentration of such family-based workshops. There are 390 brass and bell-metal production units and about two thousand highly skilled brass and bell craftsmen are in Bangladesh. They make brass and bell-metal goods of 333.7 million taka per year.

Beside BSCIC, Ministry of Youth and Sports, Department of Youth Development, Ministries of Women and Social Welfare, various Non-Government Organisations ngos extend financial, technical and marketing support to the artisans and craftsmen for the promotion of cottage industry. The government established a specialised bank named basic bank limited in 1989 to support this sector.​

 

[Saif]

Role of Cottage Industry in the Economic Development of Bangladesh

 

[Saif]

Untapped potential of cottage industries

IN THE intricate tapestry of Bangladesh’s economy, cottage industries stand as a testament to the artistry and resilience of its...

www.newagebd.net

Untapped potential of cottage industries
Md Al Noman | Published: 00:00, Feb 06,2024

IN THE intricate tapestry of Bangladesh’s economy, cottage industries stand as a testament to the artistry and resilience of its people. These industries, rooted in local raw materials and inherited skills, have a unique ability to infuse products with the personal touch of their creators. Unlike large-scale factories, cottage industries thrive on the artisan’s ability to shape beauty and individuality into their creations.

Cottage industries, often family-based or small enterprises, embody simplicity and local expertise. They operate in both rural and urban settings, utilising minimal capital to produce cost-effective goods. The Bangladesh Small and Cottage Industries Corporation, a state-owned enterprise, has been established for the development and supervision of small and cottage industries in Bangladesh.

Symphony of craftsmanship

AT THE heart of cottage industries lies a distinctiveness that sets them apart from the impersonal churn of machinery in larger factories. These enterprises weave products with the threads of inherited skills, transforming local raw materials into unique, artisanal creations. The artisan’s touch becomes a signature, imprinting individuality and charm on each piece.

Distinctive features define cottage industries, including their low capital requirements, home-based production, and the artistic imprint evident in each product. One of the characteristics of the cottage industry is that it reflects an impression of artistic talent. Craft can bring variety to the product. Moreover, the artist’s handmade products are beautiful to look at and last longer.

In a developing nation like Bangladesh, the artistic importance of cottage industries cannot be overstated. These industries hold the potential to drive economic progress by offering unique products that can compete on the global stage. Japan’s success with cottage industries serves as a beacon, demonstrating the transformative power of these enterprises in propelling a country towards prosperity.

According to a survey by the Small and Cottage Industries Association of Bangladesh, there are over 800,000 cottage industries in Bangladesh that can be divided into eight categories.

If Bangladesh can further expand its cottage industries, transforming them into a consumer goods industry, the nation can rise as an economic powerhouse in Asia.

Once, the industry was a marvel, with villages thriving as self-sufficient hubs of creativity.

Weavers, potters, and craftsmen produced a myriad of goods, including the renowned Bengal muslin. However, the mighty wave of the Industrial Revolution, led by European nations, swept away the once-vibrant cottage industry, leaving behind memories of a bygone era.

Current challenges and contributions

IN THE present landscape, cottage industries face challenges from large-scale factories and changing consumer preferences. Despite this, they persist, contributing significantly to the country’s GDP. As of June 2017, there were 8.48 lakh cottage industries engaging 37.53 lakh workers, showcasing a growth rate of 9.21 per cent.

The ever-evolving preferences of consumers, coupled with the efficiency of large-scale factories, pose formidable challenges. However, the resilience of cottage industries is evident in their continued contribution to the nation’s GDP and the employment of a significant labour force.

Future of cottage industry

BANGLADESH’S cottage industry has a bright future. As the country is going to graduate from being a least developed country soon and is now grappling with high inflationary pressure, Bangladesh urgently needs to diversify its exports and export markets to stabilise its economy. We need to emphasise cottage industries to create employment in rural areas and economic prosperity.

This will also create a circle of opportunities for many as the raw materials for the industry are being produced domestically, and the low production cost and labour availability lessen the economic risk in the industry.

However, it should be kept in mind that the long-standing problems of the cottage industry have to be overcome through a deliberate and constructive process.

Ways to revive cottage industries

CONSIDERING the potential positive impact of the cottage industry on the economy, various steps need to be implemented at the government and private levels to provide the necessary excellence of the cottage industry. The Bangladesh Small and Cottage Industries Corporation also has to take essential steps in the areas of training of artisans, improvement of production processes, market management, capital supply, etc.

In a poor country like Bangladesh, the need for cottage industries is immense. The cottage industry has the right to exist next to large-scale industries for its own sake. Just as handicraft products can meet the needs of the people, the country can become self-reliant by reducing the import of foreign goods. Moreover, the expansion of cottage industries will generate employment opportunities in both rural and urban areas. To mention, about 60 per cent of Japan’s exports come from cottage industries, and 30 per cent of the country’s labour force is engaged in small-scale industries.

In developed countries, cottage industries are proudly competing with large-scale industries. The traders of those countries are preparing a lot of products by installing small industrial machines and exporting them abroad after meeting their own needs.

The road ahead holds immense promise for cottage industries in Bangladesh. As the nation strives for economic stability, the revival of cottage industries emerges as a beacon of hope. With the potential to utilise local resources and create goods tailored for both domestic and international markets, cottage industries can play a pivotal role in steering Bangladesh towards prosperity.

Md Al Noman is a deputy junior officer at Pubali Bank PLC.​

 

[Saif]

Ensuring growth of small and cottage industries

According to pertinent observers when the economy of a country is in shackles, it is the large industries that face most of the problems while small and cottage industries can develop in the face of adversity. It is labour-intensive, employing about 87 per cent of the total labour force. These...

businesspostbd.com

Ensuring growth of small and cottage industries​

28 May 2023 00:00:00 | Update: 27 May 2023 23:44:09

According to pertinent observers when the economy of a country is in shackles, it is the large industries that face most of the problems while small and cottage industries can develop in the face of adversity. It is labour-intensive, employing about 87 per cent of the total labour force.

These enterprises are significant contributors to employment generation, poverty reduction, and economic growth.

The sector contributes immensely to the economic growth of Bangladesh. They have a multiplier effect on the economy, as they create jobs, generate income, and contribute to tax revenue. According to the World Bank, the sector contributes around 25 percent of Bangladesh’s GDP. These industries are also significant contributors to Bangladesh’s export earnings.

As indicated earlier the sector provides employment opportunities to a significant portion of the population in Bangladesh. According to the Bangladesh Bureau of Statistics, CMSMEs employ around 87 per cent of the industrial workforce and 48 per cent of the total labour force in the country. The majority of these enterprises are located in rural areas, where they create employment opportunities for women and youth. As per the statistics of the SME Foundation, there are more than 7.8 million CMSMEs in Bangladesh where 7.3 million people are engaged.

And it is a misconception that small or cottage industries remain small but there are many success stories where they have ended up as macro-enterprises.

However for small or cottage industries to flourish along expected lines they need adequate support from the government.

There is a need for state initiatives to build a strong entrepreneur network to make the country’s small and cottage industry sectors in facing the ongoing challenges of the free-market economy. Increased competition, poor quality of product, unskilled manpower, lack of management commitment to quality, unawareness about quality through organization and lack of knowledge about quality control are the main hindrances towards making small and cottage industries profitable.

Such a view was reflected in a recent interview, published in TBP, with the President of the National Association of Small and Cottage Industries of Bangladesh (NASCIB) Mirza Nurul Ghani Sovon. Shovon stated that his organisation wants the government to focus on policies and allocation aiming to help promote the growth of the sector.

Relevant data shows that finance for these industries comes through the owner’s private savings and credit by financial institutions is far from enough. We believe that there is a lot of potential in Bangladesh for the progress of this industry and the country can improve its economy further through it.
Improvements can be made through the easier availability of loans on soft terms. Marketing facilities should also be improved. Small-scale and cottage industries should be encouraged as opposed to establishing new large-scale industries in urban centres, where the infrastructure is already strained.

It is imperative to develop the cottage industry on modern lines as it is intertwined with our cultural heritage and improvement in the economy along with the increase in foreign exchange. The government should offer incentives to the workers in the sector and establish proper institutions for training so that they give their best.

For increasing investment in the country, an efficient and strong SME can certainly play its due role; but that is not enough. For increasing investment, it is also necessary to adopt policies that can induce an atmosphere of investment in the country.​

 

[Saif]

Small and cottage industries face challenge

Bangladesh’s economy is growing fast with its local backward linkage sector supplying locally produced accessories. But according to a recent report i...

www.textiletoday.com.bd

Small and cottage industries face challenge​

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Posted on November 10, 2020 5:47 PM

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Bangladesh’s economy is growing fast with its local backward linkage sector supplying locally produced accessories. But according to a recent report in a local daily, small and cottage industries say that big government plants and manufacturing units are unwilling to acquire such spare parts from the small manufacturing enterprises.

The govt. is procuring such components from big corporations who are importing these parts from abroad.

Figure: The backward linkage sector is paramount for the country to thrive and acquiring self-capability.

Small manufacturing enterprises say they have obtained their registration from the Bangladesh Small and Cottage Industries Corporation (BSCIC) to meet the standard and specification on demand.

It is worth mentioning that there is no complaint about the product's quality or any other related issues. Those are reported to meet the standard and specifications on demand.

On the other hand, the govt. is procuring such components from big companies under a policy instrument that was adopted by the ministry of industry in 2010.

In the last 35 years, Tk 6.0 billion worth of orders were placed by these big manufacturing units, which were imported.

Small entrepreneurs of the backward linkage industry say this is directly hurting them and the country’s capability in achieving self-reliance.

Not to mention, decreasing the country's gross domestic product (GDP), says the report.

Small and cottage industries, including light engineering, cannot prosper with facing such obstacles.

They also urge BSCIC to increase its monitoring of the large government manufacturing units' inventories for procurement.

Other complaints comprise fragile justifications of lack of quality of their products for rejection of their bids as well as engagement of local agents who irritate or obtain their international bids through conspiracies.

The backward linkage sector is paramount for the country to thrive and acquiring self-capability. At the same time, employing Bangladesh’s large population is one of the biggest achievements of this industry. Ensuring sustainable development of backward linkage through such small manufacturing units has a huge prospect.​

 

[Saif]

https://thefinancialexpress.com.bd/trade/cottage-industries-seek-govt-support-to-overcome-challenges-1637725609

Cottage industries seek govt support to overcome challenges​

Entrepreneurs in the cottage industries sought proper support from the government to help flourish in the sector, overcoming challenges created by the Covid-19 pandemic.

They were speaking on Tuesday at a national workshop titled 'From Challenges to Creativity and Innovation: Enhancing CMSME's Resilience in the Context of Covid-19' and prize-giving ceremony to the winners of Food Frontiers 2021.

National Association of Small and Cottage Industries of Bangladesh (NASCIB) and the Global Alliance for Improved Nutrition (GAIN) jointly organised the event at a city hotel.

NASCIB President Mirza Nurul Ghani Shovon chaired the programme while Jo Jacobsen, programme, policy advisor, nutrition, gender and M&E of World Food Programme, and Dr Rudaba Khondker, country director, GAIN Bangladesh were present as special guests.

Md Monjurul Hoque, the former chief faculty member of Small and Cottage Industries Training Institute (SCITI) of BSCIC, presented a PowerPoint on the issues.

According to the power point, about 25 per cent of the industries under the cottage, micro, small and medium enterprises (CMSME) sector were shut in the first five months of the Covid-19 pandemic.

It also showed that 60 percent of industries incurred 75 losses in selling products, and 58 entrepreneurs lost capacity of investments because of the impact of the pandemic.

Around 34 per cent of entrepreneurs could not pay rents of their institutions, while 16 per cent failed to pay salaries of their staff. Besides, 29 per cent of institutions could provide 50 per cent of the dues of their staff.

The marketing of products was hampered as the income of the majority of people declined due to the prolonged coronavirus pandemic.

The production costs increased in many cases because of the higher prices of raw materials. For these reasons, local products fail to compete with the imported ones, it said.

Entrepreneurs also faced complexities in receiving funds from stimulus packages that were provided for Covid-19 impacted sectors. They also said small and cottage food industries faced challenges due to the restriction on movements of customers during the period.

They also identified problems like the unavailability of technologies in the food sector. They suggested providing one-stop services and simplifying the process of registration and rationalising tax and tariff systems.

However, three business institutions have been awarded in different categories in the programme.

Ghost Kitchen Bangladesh won first prize of US$ 9,000 for improving the production efficiency of restaurants and commercial kitchens.

The first-ever nutrition-dense raw cashew nut processing solution to ensure nutrition for local and global markets, Green Grain won the second prize of US$ 6,700.

With the technological solution to understand the soil and market scientifically to ensure fair price for the farmers, iPAGE won the third prize of US$ 4,300 under the infrastructural grant support category.​

 

[Saif]

Fiscal incentives key to small, cottage industries’ growth

In the FY24 budget, we want the government to focus on policies and allocations aiming to help promote the growth of small and cottage industries, President of National Association of Small and Cottage Industries of Bangladesh (NASCIB) Mirza Nurul Ghani Shovon tells The Business Post’s Rafikul...

businesspostbd.com

Fiscal incentives key to small, cottage industries’ growth​

Rafikul Islam
27 May 2023 00:00:00 | Update: 27 May 2023 00:27:14

In the FY24 budget, we want the government to focus on policies and allocations aiming to help promote the growth of small and cottage industries, President of National Association of Small and Cottage Industries of Bangladesh (NASCIB) Mirza Nurul Ghani Shovon tells The Business Post’s Rafikul Islam in an exclusive interview.

Which things do you give priority in the next budget?

The Micro, Small and Medium Enterprises (MSMEs) sector in Bangladesh has emerged as a key contributor to the country’s economy, providing employment opportunities to 89 per cent of the population in urban and rural areas. With a wide network of direct and indirect members, NASCIB aims to foster the development of self-sustained and profitable micro, small and cottage industries, ultimately contributing to a prosperous Bangladesh.

The MSME sector comprises a staggering 7.8 million enterprises, employing approximately 21 million people. These enterprises play a pivotal role in driving innovation, ensuring social and regional stability, and contributing to the overall growth and development of the country.

Besides, we should prioritise capacity-building and skills development, infrastructure development, research and development support, market linkages and export opportunities for the sake of the MSME sector.

As Bangladesh strives to achieve Sustainable Development Goals (SDGs) by 2030, the MSME sector’s development becomes paramount. Prioritising the aforementioned budgetary measures is important in FY24.

What types of structural reforms are necessary to further develop this sector?

Structural reforms are crucial to unleash the full potential of small and cottage industries. We need policies that address infrastructure gaps, enhance skills development, encourage entre preneurship and foster market linkages. Additionally, promoting research and development activities and improving access to technology will help our industries become more competitive globally.

As you know that the government has SME Policy-2019 and Industry Policy-2022 focusing on the development of CMSMEs. To get maximum outcomes, time-bound action plans needs to be implemented effectively with collaborative approaches. If there is any gap, we need to identify these gaps and challenges and make it happen.

Can you shed light on the current challenges faced by small and cottage industries while doing business?

Certainly, CMSMEs often face challenges such as limited access to financing, access to information, less business environment, minimum forward and backward business linkages, less subcontracting, high inflation, increased prices of raw materials, and rising energy costs.

CMSME entrepreneurs and products are deprived of various legal, institutional and strategic benefits. On the one hand, just as the entrepreneur does not get enough benefits for product market and quality research, similarly creative and quality product research and market creation do not get strategic, technical or economic benefits. Therefore, in the way of development, international market creation or IPR can be facilitated to make domestic products industrial and efficient market, so it is noteworthy.

Furthermore, bureaucratic hurdles and complex regulatory processes hinder their growth. Addressing these challenges will require concerted efforts from the government, financial institutions, and industry associations.

What kinds of problems small and cottage industries may face after LDC graduation?

CMSMEs are the backbone of Bangladesh’s economy, and it is crucial to understand the potential obstacles they may face in the post-graduation era.
While LDC graduation presents new challenges to CMSMEs in Bangladesh, it is important to approach these obstacles as opportunities for growth and development. The government, in collaboration with industry associations like NASCIB, should develop comprehensive strategies that address the specific needs of CMSMEs.

This includes providing targeted support in terms of capacity building, access to finance, technology adoption, market access facilitation, and skills development. By addressing these challenges proactively, Bangladesh can ensure the continued success and resilience of its CMSMEs in the post-graduation era.

Considering high inflation, increased prices of raw materials, and rising business cost, do you believe that fiscal incentives are necessary for the development of the sector?

Absolutely, fiscal incentives play a vital role in promoting the growth of small and cottage industries. These incentives could include tax exemptions or reductions, duty waivers on imported machinery and raw materials, and subsidised energy prices. Such measures will help alleviate the burden on businesses and encourage their sustainable development.

What kind of policy support do you expect from the government to facilitate the growth of small and cottage industries?

We want the government to introduce supportive policies that ensure a congenial business environment. NASCIB urges the government to simplify and streamline regulatory processes, remove bureaucratic tangles and paperwork. The establishment of a single-window clearance system or an online portal for regulatory compliance would significantly improve the ease of doing business for these industries.

NASCIB firmly believes that with the right policy support from the government, these industries can flourish and contribute significantly to employment generation, poverty reduction, and overall socioeconomic progress.

The government should create a congenial environment that nurtures the growth of small and cottage industries, paving the way for a prosperous Bangladesh.

Do you get adequate support from BSCIC to develop your industries? What’s your observation?

Bangladesh Small and Cottage Industries Corporation (BSCIC) is playing a vital role in supporting small and cottage industries. However, there is room for improvement. We appreciate the initiatives, taken by BSCIC, such as providing infrastructure facilities and training programs.

However, we would like to get more targeted support, including easier access to finance, assistance in technology adoption, and marketing support for our products. Streamlining bureaucratic processes and enhancing coordination between BSCIC and industry associations will also be beneficial.

You received CIP card. What type of business you are doing and what’s your future plan?

I am the owner of a metal factory located in Kalihati of Tangail district. Our factory specialises in the production of various metal products, including components for machinery and equipment. With the CIP recognition, I feel honoured and motivated to contribute further to the growth of the small and cottage industry sector.

As for my future plans, I aim to expand the capacity of my factory and invest in advanced technologies to improve productivity and quality. I also plan to diversify our products to cater to both domestic and international markets. Moreover, I will continue to actively engage with industry associations, government bodies, and other stakeholders to advocate for the needs and concerns of small, medium and cottage industries.​

 

[Saif]

Dhaka’s handicrafts now in global market

Tucked inside Baitul Aman Housing Society at Adabor is the factory outlet of “Hand Touch” -- a handicrafts venture with a focus on recycling and catering to a niche market of hand-woven textiles in Bangladesh and abroad.

www.thedailystar.net

Dhaka’s handicrafts now in global market​

Photo: Star

Tucked inside Baitul Aman Housing Society at Adabor is the factory outlet of "Hand Touch" -- a handicrafts venture with a focus on recycling and catering to a niche market of hand-woven textiles in Bangladesh and abroad.

The endeavour, Hand Touch by Mohammad Ali Khan, has been in business since 2002 and its speciality is in home décor and textiles made by Bangladeshi women. The fabrics of choice are hand-woven materials like cotton, silk, and local fibres namely khadi, endi silk, jute, and others.

While clothing like local saris and three pieces are solely for the local market in Dhaka, the household products are of export quality and they have already grabbed the attention of the European market -- especially in countries like the Netherlands, Sweden, France, and Italy. Their products are also exported to Canada, Japan, and Saudi Arabia…even as far as Uruguay!

"Neel Poddo Crafts" is an online page of Fahmida Sultana. She buys wholesale products from Hand Touch like khadi and taant saris and sells them through social media pages. There are about 100 or more such Dhaka-based online sites that sell products bought in bulk from Home Touch.

Graduating in silk technology with weaving as a minor subject, Khan has been experimenting with fabrics made by local artisans. His most recent experiment is the double-khadi weave, where he worked on the warp and weft of the loom with handmade, recycled cotton threads.

"It is not an easy task. After many tests and trials, I got the fabric done. It was for an order of throws and cushion covers in the Netherlands. I had them printed in black, zigzag patterns and the final product looks incredible.

"What makes me happy is that it carries the 'Made in Bangladesh' tag. Just like the RMG sector, we can work wonders with our cottage industry handicrafts," said Khan.

Currently, there are 30 or so companies based in Dhaka working to export local products like wicker baskets, table mats, runners, dining cloths, kitchen aprons, napkins, kitchen towels and tote bags made of recycled cloths, jute bags, and mats. Mohammad Ali Khan has two factories in Panchagarh and Manikganj for their production.

"I have 300 producers involved in the cottage industry. I explain my order and give them a sample. Then, the women artisans get the work done maintaining strict quality control," he shared.

"In Cumilla, handmade khadi threads are spun from spinning mill wastage and I collect the garments waste, make cotton out of them, and re-spin them into threads. The khadi products are hand spun and others are woven in machines. Dhaka is buzzing with ventures promoting local crafts and there is a robust online presence of local saris," Khan explained the reason behind the busy outlet.

We know that Pabna is popular for its buti and coarse saris from Dogachi. Tangail has its fine taants, Rupganj boasts timeless Jamdanis, and Mirpur has its gorgeous katans. Similarly, Cumilla has its yarn-based handloom khadi, and Rajshahi has silk.

Needless to say, our heritage weaves, yarns, and handicrafts are still struggling to put their stamp on the global market. So, when you come across such vibrant local businesses exporting and trading in our handmade merchandise in the global markets you most certainly feel elated.​

 

[Saif]

undefined | The Financial Express

thefinancialexpress.com.bd

Steps to boost handicraft sector, expand export footprint
REZAUL KARIM
Published :
Jun 16, 2024 10:30
Updated :
Jun 16, 2024 10:30

The government has initiated comprehensive strategies for the handicraft sector, aimed at boosting exports and broadening the nation's export basket, according to the Commerce Ministry.

To achieve these goals, a high-powered committee has been formed by the ministry to develop an action plan within a month. This 13-member committee will assess the overall situation of the handicraft sector.

Sources said the government intends to implement the "One Village, One Product" (Ekti Gram, Ekti Ponno) strategy to promote Bangladeshi handicrafts both domestically and internationally.

In a recent notification, the Commerce Ministry has designated handicrafts as the product of the year 2024, emphasising the role of women in their production and aiming to enhance exports and diversify the export basket.

Earlier, the Commerce Ministry instructed Deputy Commissioners (DCs) to compile lists of handicrafts in their respective districts, including details such as producers' names, addresses, and the stories behind their products.

DCs have also been directed to showcase handicrafts prominently at the upcoming fair during Pahela Baishakh, the Bengali New Year.

Handicrafts can play a special role in the "One Village One Product" selection process. Steps are being taken to select handicraft products (which may include food items) from villages, identify producers, choose the best products from the country and brand them for competitiveness in domestic and international markets.

To further bolster the sector, the ministry plans to exhibit these products at airports, national institutions, and selected Bangladeshi embassies abroad.

The government will offer training and technical assistance to improve product quality and competitiveness, alongside policy support such as low-interest or interest-free loans from financial institutions, without the need for collateral. Additionally, efforts are underway to promote these products through e-commerce platforms.

The handicraft industry is integral to Bengali culture and heritage, noted for its labor-intensive nature, low capital requirements, and reliance on local raw materials, which keeps production costs low, said an official.

He emphasized its potential to contribute significantly to poverty alleviation and women's economic empowerment, providing opportunities for financial independence.

With Bangladesh graduating from the least developed country club, the government should place greater focus on smaller but promising sectors like handicrafts, he noted. These products are gaining huge popularity worldwide. The sector currently benefits from a 10 per cent cash incentive on export receipts, which was double the rate before 2019.

According to an estimate by the International Market Analysis Research and Consulting Group, the global handicraft market size reached $752.2 billion in 2022. The market size is expected to rise to $1,296.6 billion by 2028.

Bangladesh's export earnings from the sector saw sharp growth in the three fiscal years from 2020 to 2022. According to Export Promotion Bureau (EPB) statistics, the figures were $20.52 million, $33.97 million and $42.83 million respectively.​

 

[Bilal9]

The Bangladesh cottage industry has come a long way in the last two decades, but they really have to focus on designs and items people buy in the West. They have to take samples from Western markets and focus on making exact copies. Western Housewives are focused on certain tried and true designs for everyday-use home articles like baskets, handbags etc. Rattan and "Jhute" (RMG clothing industry reject pieces)are exported to other countries, which they use to produce and export articles like placemats and handbags - even patio furniture. We don't do much with those, which is regrettable.

Go to the web and look at how much a set of rattan furniture costs in websites like WayFair. In the Philippines, Vietnam and Indonesia, these furniture (along with other types of handcrafted furniture) are a major industry. This patio set in Wayfair costs around $1200.

I know these are examples of furniture, but there is a distinction between machine made and handcrafted items like patio sets made from Rattan.

The quality of our handicraft items is already pretty good. They just have to provide a better product at a cheaper price point compared to other countries.

 

[Saif]

For shared prosperity, formalisation of work is vital

The informal sector plays a crucial role in creating local jobs, especially for women and youth in Bangladesh.

www.thedailystar.net

Micro-, Small and Medium-sized Enterprises Day
For shared prosperity, formalisation of work is vital

Md Bilal Hussain, 73, learnt weaving from his father. Born in a family of weavers, he believes weaving is in his blood, inherited from his ancestors. His last employer confirms that Bilal is the best weaver he ever had. He is excellent at weaving silk sarees and salwar kameez.

Bilal worked for 57 years—42 with his last employer and 15 years with another. At retirement, he earned Tk 6,200 a month on average, being paid Tk 1,400 for each piece of clothing he made. Bilal retired in November 2023. His failing eyesight and aching body compelled him to stop although he did not want to. His low earnings never permitted him to save anything. He is not getting any retirement benefits as his employment was informal. Devoid of benefits, he is now at the mercy of his sons for the rest of his life and believes the Almighty will provide for him.

Ferdous Munsi, the owner (malik) of the small saree-making cottage enterprise where Bilal worked, explained the business. He spends Tk 2,000 on raw materials, mostly imported, for each saree and pays workers like Bilal Tk 1,400 to make the saree. This then retails at Tk 4,000. His gross profit does not even cover the rent of the space and the holding cost of inventory for the off season. He is critically aware of the low wages his workers are getting, but can do nothing about it.

This is the reality in the informal sector. The Bangladesh Labour Force Survey 2022 shows that close to six crore (60 million) people, 84.9 percent of total working population in Bangladesh, are in informal employment. It is noteworthy that out of the total employed women in Bangladesh, 96.6 percent are in informal employment. Similarly, 92.7 percent of youth aged 15-27 years are employed informally. Informal employment can be both in formally registered businesses and in the unregistered ones.

Economists opine that some level of informality is expected in a growing economy like Bangladesh, where an effective business governance system and procedures are yet to be established. There are several reasons for the widespread informality in the country. Studies have suggested that the ineffectiveness of public services like registration, licensing and tax processing of businesses are among the main reasons. On the other hand, lack of clear incentives to formalise, limited understanding of the process of formalisation, and limited employment opportunities are other impediments.

The consequences of the high informality are severe: low tax to GDP ratio, widening inequality, stagnant industrial competitiveness in sectors other than ready-made garment (RMG) and low labour productivity, and low product and service quality. Informality also hinders the potential of the industrial sector to participate and benefit from growing international value chains and export market opportunities. These are extremely critical as Bangladesh prepares to graduate from LDC status and enters the global market on the basis of competitiveness and productivity.

While the prioritisation of formalisation in the Industrial Policy 2023 is a welcome step, there is a dearth of studies on the potential positive impact of formalisation and Bangladesh's capacity to formalise to inform policymaking. Furthering the formalisation agenda is imperative for the country if it is to achieve the ambition of economic diversification and modernisation of the private sector to become competitive globally. The implementation of the policy requires an integrated effort from the whole of the government, the private sector, and workers' organisations. The success of ongoing labour sector and social protection reforms are also key to addressing informality.

The informal sector, which comprises cottage, micro-, small and medium enterprises, not only operates closest to local communities, but plays a crucial role in creating local jobs, especially for women and youth in Bangladesh. As we commemorate the Micro-, Small and Medium-sized Enterprises Day today, we recognise that it is a vital sector at the heart of our societies with tremendous potential to accelerate decent job creation and achievement of the SDG goals.

To fully harness its potential, a transition to formalisation is necessary to ensure that the millions of workers in the sector do not end up like Bilal—destitute after a fully productive working life.

Gunjan Dallakoti is small and medium enterprise development specialist at the International Labour Organization (ILO).​

 

[Saif]

Lack of funding slows SME policy implementation

A lack of necessary funding and coordination among the affiliated organisations has been one of the main reasons for the slow implementation of the SME Policy 2019, leaving many provisions unrealised, said Ashraf Ahmed, president of the Dhaka Chamber of Commerce and Industry (DCCI).

www.thedailystar.net

Lack of funding slows SME policy implementation
Dhaka chamber calls for reforms in the new scheme

Various refinancing and credit guarantee schemes should be introduced for small and medium enterprises on the basis of their needs and nature, said an expert. Photo: Star

A lack of necessary funding and coordination among the affiliated organisations has been one of the main reasons for the slow implementation of the SME Policy 2019, leaving many provisions unrealised, said Ashraf Ahmed, president of the Dhaka Chamber of Commerce and Industry (DCCI).

The goals and objectives of the SME policy should be determined in conjunction with the industrial policy and the five-year plan should be set targeting the future goals of the entire industrial sector, he said.

The SME Policy for 2019 expired in June this year and the latest policy should be included in the budget and work plan formulation activities of different organisations, the Dhaka chamber president said.

He made the comments at an event, titled "Reform of SME Policy-2019 for Sustainable Growth and Innovation", at its office in the capital's Motijheel yesterday.

An agro-based economy will not alone be sustainable for the overall economy, rather the country should go for industrialisation, he said.

Service sector export should also be enhanced, he added.

It will not be possible for many SMEs to survive without increasing the flow of liquidity, Ahmed said.

He also highlighted new models of financing, such as electronic nano-financing, electronic channelling, automation of licensing and its renewal, availability of high-level skills, intellectual property protection, and high-speed broadband internet for the development of the SME sector.

Moreover, he suggested a comprehensive database of SMEs so that the informal sector can be brought into the formal sector.

There is a lack of coordination among government agencies, said Mirza Nurul Ghani Shovon, president of the National Association of Small and Cottage Industries of Bangladesh.

If the government does not arrange the required funds for the implementation of the new SME Policy, it will remain unimplemented again, he said.

He also suggested keeping the arbitration system and bringing the informal SME sector under the new SME policy, he said.

The government is trying to formulate an SME policy of global standards and for that cooperation from all stakeholders will be needed, said Salim Ullah, an additional secretary for policy, law, and international cooperation of the industries ministry.

All the shortcomings of the previous policy will be addressed, and the new one will try to reflect the requirement of all stakeholders for the betterment of the SME sector, he said.

There is a need to have various refinancing schemes and credit guarantee schemes because there are different types of SME entrepreneurs, and their needs are also different, said Nawshad Mustafa, director of the SME and special programmes department of the Bangladesh Bank.

He also stressed the need for having a common facility centre to promote small and cottage entrepreneurs across the country. Anwar Hossain, vice chairman of the Export Promotion Bureau (EPB), reiterated the importance of automation in all client service activities of the government.

The EPB is also trying to make its services automated soon, he said, adding that the backward linkage industry should be strengthened, especially the SME sector.

The National Board of Revenue (NBR) should consider introducing a simplified tax filing process, especially for the cottage, micro, small and medium enterprises (CMSMEs), as too much documentation process is a burden for them, Hossain said.

The SME sector will not develop without the government's patronisation, said Mosharref Hossain, associate professor at the Bangladesh Institute of Bank Management.

He suggested establishing an SME innovation lab where small innovators will get a place to flourish.

The SMEs should also get easy access to finance and the government should have a separate seed fund or venture capital or startup fund for the SME entrepreneurs, he said.

A roadmap is also needed to implement the policies, Hossain added.​

 

[Saif]

Flood-hit SMEs seek govt assistance

Devastating floods in August and the following months have made life miserable for dairy and livestock farmers as well as small entrepreneurs, who are now struggling to meet operational expenses and repay bank loans after losing most of their belongings.

www.thedailystar.net

Flood-hit SMEs seek govt assistance

Devastating floods in August and the following months have made life miserable for dairy and livestock farmers as well as small entrepreneurs, who are now struggling to meet operational expenses and repay bank loans after losing most of their belongings.

Some businesses and homes have been directly damaged by the floods while others experienced a sharp decline in sales, according to various entrepreneurs and leaders of business associations.

Nazma Akhter, an entrepreneur from Begumganj upazila in Noakhali district, lost 10 of the 50 cows on her farm, which was submerged under three feet of water during the recent floods.

The businesswoman told The Daily Star that the floods have caused her over Tk 10 lakh in losses.

"I have been running the farm with loans from various banks and non-government organisations [NGO]. But I couldn't sell a single drop of milk in the past one month, which have compounded my financial difficulties."

"So far, there has been no government support. Without it, I may have to shut down the farm."

Similarly, Rahima Bibi, an entrepreneur from Noakhali sadar upazila, said the floods have washed away all the fishes and ducks of her pond and farm, causing an estimated loss of Tk 1.25 crore.

The 55-year-old said she had plans to repay about Tk 1 crore in loans taken from Janata Bank, Mercantile Bank and 10 NGOs by selling fishes in November and December.

She had also planned to use her farm's earnings for her daughter's wedding.

"But the floods have put me in great danger. How can I now pay the instalments of bank and NGO loans? It is impossible to recover if the government does not cooperate," she said in a voice filled with distress.

To highlight the gravity of the damages, the disaster management ministry and the Centre for Policy Dialogue (CPD) have released separate reports.

In both reports, the amount of financial loss was mentioned to be above Tk 14,000 crore.

The sudden August floods have claimed 74 lives and injured 68 others nationwide, according to the disaster management ministry.

The ministry calculated the financial toll based on damages to agriculture, housing, roads and overall infrastructure across 11 districts in the eastern part of the country, with Feni being the worst affected.

Some 9.43 lakh people were affected by floods and half of them were displaced from their homes and sought shelter elsewhere, it said.

In its study, the CPD said the government would need to increase its budget for relief distribution.

The think-tank said the damage was equivalent to 1.81 percent of the national budget and 0.26 percent of the country's projected gross domestic product (GDP) for fiscal year 2024-25.

The floods, triggered by heavy rainfall and upstream hill runoff, began on August 20 this year and rapidly spread through districts such as Feni, Cumilla, Chattogram, Khagrachhari, Noakhali, Moulvibazar, Habiganj, Brahmanbaria, Sylhet, Lakshmipur and Cox's Bazar.

Despite the widespread damage, flood victims in Mymensingh, Sherpur and Netrokona are reportedly suffering from insufficient relief supplies and a lack of drinking water.

Flash floods have stranded 280,000 people in these districts, according to data of the local administration.

The agriculture and fishing sectors were particularly hit hard in these regions.

Anwar Hossain, the owner of a light-engineering workshop from Station Road in Cumilla district, described how the floods have affected his business.

Before the disaster, Hossain used to sell more than Tk 1 lakh worth of goods daily, which plummeted to between Tk 20,000 and Tk 30,000 because of the damage to agricultural lands.

"I am now struggling to cover my workshop's monthly expenses, pay bank loan instalments and make interest payments."

Another entrepreneur from the same area, Mohammad Arif, who manufactures autorickshaws, reported that his sales have dropped by about 30 percent due to the floods.

Tapas Kumar Paul, president of the Rudra Paul Pottery Cooperative Society in Bijoypur of Cumilla, said the floods have destroyed the raw materials, stocks and homes of pottery makers across four villages.

The members of the association have counted losses of around Tk 35 lakh, Paul said, urging the government to assess the volume of the losses and extend immediate assistance to affected businesses.

Sajol Borakurmi, president of the Rangichhara Cooperative Society in Kulaura upazila in Moulvibazar, said collecting loan repayments has become extremely challenging.

"Most customers are now unable to pay their instalments and there is also a rush among people to take loans to repair their homes," he added.

After the floods, a team from the SME Foundation visited the affected districts, including Cumilla, and handed over a report to the industries ministry after gathering recommendations from entrepreneurs.

The small-and-medium enterprises (SMEs) are considered the lifeline of Bangladesh's economy, contributing about 25 percent of the country's GDP, said the state-owned organisation responsible for promoting SMEs.

In its report, the foundation said the raw materials, stock products and houses of many SME entrepreneurs have been damaged while many traders were not directly affected.

The buyer groups of many SMEs, mainly involved in agricultural, saw their sales fall by about three-fourths as they were unable to source enough products, with many farmlands being submerged, it said.

The foundation suggested that banks and financial institutions halt loan instalment collections, waive interest on loans, provide financial incentives to victims, offer low-cost loans with flexible terms and take steps to expand market opportunities.

The affected SMEs would face long-term financial difficulties if they are not provided with immediate support, it warned.

Anwar Hossain Chowdhury, managing director of the SME Foundation, said the SMEs have faced numerous challenges due to the political unrest starting from June this year followed by two rounds of flooding.

The foundation requested Bangladesh Bank to ask banks to refrain from imposing fines or extra interest on businesses in case of failure to repay loans in time.

Our Moulvibazar correspondent contributed to this report​

 

[Saif]

Bridging MSME financing gaps with customised digital credit scoring

Micro, Small, and Medium Enterprises (MSMEs) are known as the lifeblood of the world economy. The presence of MSMEs in every economic channel develops forward and backward linkages for large businesses as well. According to World Bank data, SMEs contribute 40 per cent to the Gross Domestic Product

thefinancialexpress.com.bd

Bridging MSME financing gaps with customised digital credit scoring
Sanjoy Pal
Published :
Nov 12, 2024 21:35
Updated :
Nov 12, 2024 21:35

Micro, Small, and Medium Enterprises (MSMEs) are known as the lifeblood of the world economy. The presence of MSMEs in every economic channel develops forward and backward linkages for large businesses as well. According to World Bank data, SMEs contribute 40 per cent to the Gross Domestic Product (GDP) globally. In Bangladesh, MSMEs contribute 25 per cent to the GDP, whereas in comparable economies like Indonesia, Sri Lanka, Pakistan, and Vietnam, MSMEs contribute 40 per cent or more. The International Finance Corporation (IFC) has estimated that about 40 per cent of formal MSMEs in developing countries have unmet financing needs of $5.2 trillion each year. They also concluded that 70 per cent of MSMEs in emerging markets are not receiving adequate funding, with most of these concentrated in Asia and Sub-Saharan Africa. By addressing their unmet financing needs, banks and mobile financial services (MFS) can become effective market players to enhance MSMEs' contributions to emerging economies like Bangladesh.

Although medium enterprises within MSMEs are generally able to place themselves under the umbrella of the banking system, micro and small enterprises struggle significantly. For certain period, most MSME financiers preferred collateral-based financing over cash flow-based financing, believing that security would act as a safeguard for recovery in case of loan default. Financiers also tended to provide generic loan facilities to all types of customers. Market research on product diversity for MSMEs was minimal. However, MSME research has now extended its scope. It is known that many MSMEs, especially those in rural areas, prefer to transact their revenues in cash rather than through the banking system, which hinders their participation in the formal sector.

At the end of the day, although the profits they generate correspond to their income, the lack of prepared documentation prevents them from accessing external sources of financing, particularly from banks and non-bank financial institutions (NBFIs), which leaves the economy distant from the concept of financial inclusion. In the digital era, the financing needs of MSMEs can be met if accurate and reliable data is readily available. To ensure data availability and alignment with international best practices, Bangladesh Bank recently issued guidelines on the licensing, operation, and regulation of credit bureaus. Financiers can easily obtain the necessary data from licensed credit bureaus for credit assessments before making financing decisions.

MSME financing has improved due to the global implementation of credit scoring, which enables financiers to reduce the time required for financing decisions. According to CGAP research, the main disadvantage of traditional credit-scoring methods is that low-income individuals and informal businesses often lack financial data (such as transaction records, tax receipts, and bank statements), resulting in marginal users having marginalised credit scores. This type of credit profile is referred to as a "thin file." In contrast, inclusive credit-scoring models combine traditional financial transaction data with alternative data (such as e-commerce transactions, personal purchases, mobile wallet data, geolocation, bill payment histories, and social media usage), which can help reduce the financing gap. Credit-scoring systems minimise the high operational, financing, and monitoring costs of banks and financial institutions by using digital means. Data is the primary resource processed to assess the creditworthiness of borrowers through credit scoring.

Credit scoring can be an effective tool to streamline a financial institution's MSME financing process, especially with the influx of digital banking in Bangladesh. Broadly, MSMEs are segmented into three categories - manufacturing, service, and trade - each of which includes various sectors of the economy. The credit scoring components used to assess borrowers and their financing requirements should be customised based on business nature, model, and performance. For example, although both logistics businesses and restaurants fall under the service sector, their business models are entirely different. Therefore, the numerical weightage of credit-scoring components should differ for each. Additionally, while logistics businesses are capital-intensive, restaurant businesses are manpower-intensive. Investment in logistics is significant and vehicle-oriented, whereas investment in restaurants is relatively lower and primarily directed toward infrastructure development. As a result, the scoring weightage on gross profit margin and net profit margin should not be the same for both. Similarly, the parameters for account turnover, tied-up period, and debt-equity ratio will differ for each business. Credit scoring parameters for MSMEs must be business-specific and logically linked to the nature of the business.

It is now essential to refine the financing strategy. To eliminate frictions and distortions in credit assessment and reduce the financing gap, financial institutions should design customised credit-scoring methods for MSME assessment. Furthermore, a risk-minimisation-centric credit-scoring policy should be established by the central bank of Bangladesh, similar to the initiative for credit bureaus. With customised credit scoring for MSME customer analysis and financing assessment, bankers will be better equipped to access the unserved or underserved MSME market in Bangladesh.

The writer is a Banker and Financial Modeling & Valuation Analyst (FMVA®) certified from Corporate Finance Institute, Canada.​

 

[Saif]

Policies promoting new-generation micro and small enterprises for productive job creation​

Policies promoting new-generation micro and small enterprises for productive job creation

In Bangladesh, micro and small enterprises (MSEs) and cottage enterprises (CEs) which are mostly managed by own-account workers together provide a vast majority of employment for the country's enterprise sector. Latest available statistics of the Bangladesh Bureau of Statistics (BBS) show that CEs

thefinancialexpress.com.bd

 

[Saif]

Reforms that we need for the MSMEs in Bangladesh

To increase value per MSMEs, we also need to build capacity of the MSME associations.

www.thedailystar.net

Reforms that we need for the MSMEs in Bangladesh

Due to the low entry barrier and the informality of the MSMEs, success of one MSME draws in multitude of similar enterprises. This leads to a price war that eventually proves to be detrimental to all. SOURCE: FREEPIK

Micro, Small and Medium Enterprises (MSMEs) create self-employment, apprenticeship and jobs for the unskilled population. They help solve economic problems faced by the youth, women and marginalised communities, while providing innovative merchandise and services and making products and services more accessible and affordable. During the Covid lockdown, we saw a new wave of MSMEs flourish through online sales. A large number of women ran such enterprises through various platforms, such as Facebook. But the recent years have been tough. The diminishing purchasing power of the consumers is hurting the MSMEs. Global value chains are in shambles and prices of imports have increased. The exchange rate devaluation has not helped the matter either—it is now 30 percent more expensive to advertise products on Facebook. The MSMEs cannot increase prices in proportion to the costs as that would result in a loss of sales in a country like Bangladesh, where inflationary pressure is high. Given their low switching costs, a large number of MSMEs are leaving the market. This has created a vicious loop of underperformance and informality.

I believe the solution to this problem lies in policies that foster value creation by the MSMEs and expansion of the market base and reduction in price competition. The consumer is always seeking the highest value for the price paid. In a market with two MSMEs, if both MSMEs offer the same product, the consumers will buy from the one that sells it for a lower price. If one producer offers, say, ketchup made with organic tomatoes, while the other sells regular ketchup, the first one gains from the premium market while the second one gains from the price-sensitive market. This is beneficial for all parties involved. Similarly, if one MSME produces home-baked bread and another sells diabetic bread, both gain as they serve different values. However, in Bangladesh, MSMEs thrive in the price-sensitive market rather than in the value-focused one. Due to the low entry barrier and the informality of the MSMEs, success of one MSME draws in multitude of similar enterprises. This leads to a price war that eventually proves to be detrimental to all.

The economic significance of value creation will be clearer if we compare the data on MSMEs per thousand people and the value of MSMEs for different countries. There are 79 lakh SMEs in the country, according to the Planning Division. As per IFC's SME Finance Forum's 2019 database, Bangladesh has 50 MSMEs per thousand people. India has 48 per thousand, Pakistan 18, UK 40, and China 17. The number of MSMEs does not drop with affluency of a country. Luxemburg has 54 MSMEs per thousand, Sweden has 32 and Japan 43. This raises the question: how does Luxemburg, a country of over 6,75,000 people (according to Worldometer), have so many MSMEs? The answer lies in the value created by the MSMEs in Luxemburg. The definition of MSME is largely the same across countries by the number of employees but differs in terms of assets or revenue per enterprise. According to a policy paper of Bangladesh Bank, an enterprise is small if it has no more than 50 employees and if its fixed asset other than land and building is within the range of Tk 50,000 to Tk 1.5 crore. In contrast, in Luxemburg, which follows the European Union (EU) definition of SMEs, an enterprise is small if it employs less than 50 people and its annual turnover or balance sheet total is 10 million euros or Tk 130.30 crore. A small enterprise in Luxemburg is almost 86 times more valuable than a small enterprise in Bangladesh.

Our policymakers rarely get into this discussion of value creation. We are more interested in the number of MSMEs, and the number of jobs created by the MSMEs, as our formal sectors fail to create the large number of jobs that we require to employ our youth.

How do we get out of this vicious cycle? The answer is: by directing the MSMEs to enter untapped niches and by incentivising value creation. The Palli Karma-Shahayak Foundation's (PKSF) Sustainable Enterprise Project (SEP) has shown how mixing microcredit with technical assistance, skills development and market creation activities can help rural MSMEs to target strong niches through value added products. We need to emulate this at the national level. PKSF's Partner Organisations (POs) or the Micro-Finance Institutions (MFIs) have been capacitated to support the MSMEs. The SME Foundation needs to partner with financial institutions and business associations along with business development service providers to map out the range of niche markets that remain untapped for the MSMEs and provide soft loans together with skills for product development, quality assurance and market promotion support. PKSF itself can work as a special purpose vehicle to scale this project through the MFIs. We need to reduce cost of doing business for the MSMEs to incentivise formalisation. Cost of business can reduce if we give access to preferential rates on facility rents, technology, services, machineries and equipment. The immediate return from legalisation should be much higher than the cost of it.

In addition to these, information on markets, logistics suppliers, business development service providers, financial service providers need to be widely available. SME Foundation's works on cluster mapping should be revisited to identify natural clusters with fully integrated vertical and horizontal linkage activities and specialised clusters with just one type of entities in the value chain. The prospect of cluster and value chain financing for Bangladesh has already been mapped and presented for the national SME policy in Bangladesh. However, these proposals are yet to be made operational.

To increase value per MSMEs, we also need to build capacity of the MSME associations. Bangladesh Furniture Industries' Owner's Association (BAFIOA) is a testimony of how the associations can champion growth of an entire sector. By building associations, we should be able to unlock potential for export. But the foundation must be set by expanding the local market base. By strategically targeting value creation, we will be able to unleash the true power of growth of our MSMEs.

Md Rubaiyath Sarwar is managing director at Innovision Consulting.​

 

[Saif]

Cottage industries on the wane as production falls

Smaller and medium industries in Bangladesh are becoming weaker as their production has steadily been down over the years, painting a grim picture of employment generation, according to officials. The manufacturing growth in cottage, micro, small and medium enterprises (CMSMEs) had been lower in f

thefinancialexpress.com.bd

Cottage industries on the wane as production falls
Call for formalising CMSMEs for economic growth
FHM HUAMAYN KABIR
Published :
Nov 24, 2024 00:46
Updated :
Nov 24, 2024 00:46

Smaller and medium industries in Bangladesh are becoming weaker as their production has steadily been down over the years, painting a grim picture of employment generation, according to officials.

The manufacturing growth in cottage, micro, small and medium enterprises (CMSMEs) had been lower in fiscal year (FY) 2023-24 than in previous years, official data showed on Saturday.

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

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

Since CMSMEs are the backup industry for larger ones, their production fall will ultimately affect manufacturing at bigger industries, 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 disclosure by the Bangladesh Bureau of Statistics (BBS), the year-on-year industrial production growth rate in micro, small and medium enterprises (MSMEs) lowered to only 5.07 per cent in FY24.

The rate was lower than that in the previous two consecutive fiscals of FY22 and FY23.

According to the MSMEs industrial production index, the FY22 growth was 15.39 per cent and that in FY23 was 9.03 per cent, according to the National Accounts Statistics-2024 report.

Under MSMEs, the production of machinery and equipment has dropped drastically as it marked 45.55-per cent negative growth in FY24.

Machinery and equipment output maintained positive growth in FY22 and FY23.

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 FY24.

Based on the production index, the growth rate in the cottage industry also lowered in the same fiscal.

The BBS data showed that the year-on-year production at the cottage industrial has been lowered to 6.7 per cent in the last FY2024.

The home-based industry expanded at a 7.67-per cent rate in FY22 and 9.96 per cent in FY23, reveals the BBS data.

Although machinery and equipment manufacturing has got a good leap over the last few years in the cottage industry, gadgets like computer, electronic and optical items, coke and refined petroleum products, rubber and plastic goods maintained negative growth.

Dr Zahid Hussain, a former World Bank economist, told the FE that a gradual decline in demands has affected the production of CMSMEs domestically.

"Inflation is higher. 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 CMSME products has dropped."

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.

As the highest number of jobs is created by CMSMEs in Bangladesh, their lower growth might affect the employment, according to Policy Exchange Bangladesh chairman Dr Masrur Reaz.

"If the trend continues, Bangladesh's employment will shrink further and people will fall behind the poverty line," he told the FE.

As these sectors are the backup industry for large manufacturers, their recovery is needed, continued the economist.

Cottage, micro and small industries should be brought under the formal sector for their survival and also for the growth of the national economy, he cited.

"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.​

 

[Saif]

Most SMEs cite tax structure as main barrier

Around 57 percent of surveyed small and medium enterprises (SMEs) cited the existing tax structure as the main obstacle to doing business in compliance with the law, according to a report by the SME Foundation.

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Most SMEs cite tax structure as main barrier

Around 57 percent of surveyed small and medium enterprises (SMEs) cited the existing tax structure as the main obstacle to doing business in compliance with the law, according to a report by the SME Foundation.

The trade licence renewal process was the next biggest barrier, being identified by 54 percent of entrepreneurs, it said.
.
Other leading concerns were regarding the cost of trade licences, singled out by 51 percent of respondents, and the complexity of laws and regulations, pointed out by 44 percent.

Melita Mehjabeen, a professor of the Institute of Business Administration (IBA) at the University of Dhaka, conducted and led the research.

She presented the findings at a seminar yesterday.

The seminar, styled "Informal SMEs in Bangladesh: Formalization Challenges and Way Forward", was organised by the SME Foundation and German development agency Friedrich-Ebert-Stiftung (FES), Bangladesh at Parjatan Bhaban in the capital yesterday.

Sadia Noor Khan, an associate professor of the Department of Banking and Insurance at the University of Dhaka, was the co-researcher.

The study surveyed 304 entrepreneurs across Dhaka, Chattogram, Sylhet, Khulna and Rajshahi.

Mehjabeen said more than 74 percent of small and medium entrepreneurs want to do business in line with government rules and regulations.

However, there is a need to simplify the rules. Introducing one-stop services, collateral-free loans and increasing the benefits of doing business in compliance with the law are also necessary, she said.

To do business in accordance with the law, seven certificates are needed from different government departments in India, Mehjabeen said.

But permission from around 34 departments is required in Bangladesh, she added.

As most SMEs are informal, they remain outside the tax net.

So, Mehjabeen suggested the government prepare a comprehensive strategy paper to bring these organisations under existing structures, formalise them step by step and provide monetary and non-monetary incentives to entrepreneurs.

SMEs accounted for almost 25 percent of Bangladesh's gross domestic product in 2018, according to a Planning Division report.

SMEs account for about 90 percent of businesses and more than 50 percent of employment around the globe, according to a 2022 World Bank report.

The contribution of SMEs in the formal sector is up to 40 percent of the GDP in emerging economies, it added.​

 

[Saif]

Reviving Dhaka’s classic cane furniture traditions

Hollowed cane chairs with pillowy cushions in white cotton covers surrounded a cane centre table with a glass top, on which, there would be a brass flower vase, posing with beautiful pink roses or gardenias from the garden -- this was how verandas looked years ago in Dhaka, or casual day rooms...

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Reviving Dhaka’s classic cane furniture traditions

PHOTO: PRABIR DAS

Hollowed cane chairs with pillowy cushions in white cotton covers surrounded a cane centre table with a glass top, on which, there would be a brass flower vase, posing with beautiful pink roses or gardenias from the garden -- this was how verandas looked years ago in Dhaka, or casual day rooms. Cane furniture was a timeless and vintage home décor style in Dhaka homes of the sixties.

"I remember my mother had a cane basket to put the flasks and milk bottles for my younger brother, sort of like the baby diaper bags we carry now. That square basket with compartments and a hooked cover, was my favourite plaything. I had one chamber to stow my dolls when we went out," says Tripti Reman, a homemaker.

"Our rare Dhaka visits always meant taking a rickshaw ride to Green Road, the only street selling such merchandise. Those beautiful cane items, like the lidded wicker baskets for picnics, the sprawling divans, and daybeds with hand-embroidered sheets, the ball chairs, highchairs for babies, bar chairs, and room partitions are all reminders of the colonial influence on our home styling," Reman remembers fondly.

Planters' chairs made from cane and timber, with the wicker woven in a criss-cross pattern on the back and bottom, were a common choice of our yesteryear interiors. And now, Dhaka people are once again opting for classic wood and cane furniture. Old-world charm is in; an impression you seem to gather if you browse through some f-commerce sites offering antiques.

"Rustic, and very homely cane products were common in our household before the plastic and wooden boards took over our interiors," says Masudul Islam Gias, the current owner of Yamim Furniture Fair, the famous cane furniture store in Green Road, which has been in operation since the sixties. Gias a second-generation manufacturer and dealer of all kinds of cane and bamboo products, explained that the main difference between cane, wicker, and rattan is that cane and rattan are materials, while wicker is a weaving technique.

"The trend of using cane-bound wood furniture is on the rise, but unfortunately, we manufacturers cannot cash in on this new demand. Our business dipped sharply since the early 2000s and never regained momentum. The skilled craftsmen for cane binding took to other professions and those in profession charge Tk 800 for a day's work, while imports became a tedious process, and the government imposed a 15 percent VAT on handicrafts. With all these issues plaguing the sector, it is in dire straits now," Gias laments.

Unlike the dedicated gardens for crops that need cultivation, cane has no specific area for mass forest production in Bangladesh. Dhaka mostly imports cane from the Arakan regions via the Chattogram-Cox's Bazar route, which is not the best option. A single container of cane stripe bundles, if imported from Indonesia, can cost almost Tk 50,000 and it might take three to four years to sell the load off. Since it is a slow item and the import process is tedious, importers are not keen on this business.

Currently, the once thriving stores in Green Road are on the verge of closure.

Favourite cane items like rocking chairs, cabinets, and sofa sets are priced between Tk 7,000 to Tk 40,000, so the middle-class opts for cheaper plastic or foreign furniture, leaving these artisanal stores with almost no sales on lean days.

Cane furniture was in vogue in the British and Dutch colonies such as Indonesia, India, and the Caribbean for its natural texture, and eco-friendly and biodegradable features, and this furniture brought about an aesthetic appeal to the bungalows they lived in.

Dhaka interiors are going green by popular choice, so adding a traditional beth-er-mora or cane stool to your décor only adds to the earthiness and a vintage charm to your home, while also helping the cane stores on Green Road survive.​

 

[Saif]

Proposed SME policy repetition of failed one

The National Small and Medium Enterprise Policy 2025 has been drafted without any major changes in strategies adopted in the recently expired policy that failed to achieve the main targets.

www.newagebd.net

Proposed SME policy repetition of failed one
Shakhawat Hossain 10 January, 2025, 00:14

The National Small and Medium Enterprise Policy 2025 has been drafted without any major changes in strategies adopted in the recently expired policy that failed to achieve the main targets.

Giving almost the same emphasis on the establishment of a 37-member SME Council headed by the adviser or minister for industries, the draft also recommended continuation of a task force headed by the secretary to the industry ministry, said officials concerned.

Referring to data of 2013, the proposed policy said that 2.1 crore people were employed in 78 lakh SMEs which accounted for 28 per cent of the gross domestic product.

The sector’s target to the GDP was, however, projected at 32 per cent by 2024 from 25 per cent projected in the SME Policy 2019, said the officials.

No interpretation has been made in the new policy regarding the failure to achieve the main target, added the officials.

Institute for Inclusive Finance and Development executive director Mustafa K Mujeri expressed disappointment over the repetition of such policy.

‘It is a sheer waste of time by bureaucrats,’ he said, adding that the proposed policy would remain incomplete without a thorough review of the previous policy which expires in 2024.

The draft has, however, called for a solution to overcoming problems linked to the access to finance for the SME operators since the access to sustainable credit has remained as a contentious issue for long.

The unwillingness of banks and financial institutes to provide credits to SMEs became visible with the disbursement of only 27 per cent of Tk 20,000 crore incentive announced by the Bangladesh Bank to tackle the challenge caused by Covid outbreak.

The SMEs, however, bore the main brunt of the two-year-long pandemic, said Small and Medium Enterprises Owners Association of Bangladesh president Md Ali Zaman.

Limited access to finance remained as one of the major challenges for the SMEs over the past decade in Bangladesh, as banks generally favoured larger and well-established companies, according to the White Paper on the State of Bangladesh Economy.

The white paper, prepared by a 12-member committee led by Centre for Policy Dialogue Debapriya Bhattacharya, noted that the SMEs faced difficulties in conducting operations in the intricate regulatory environment.

It said that the complex regulations included cumbersome and bureaucratic licensing procedures, inconsistent application of rules and lack of supporting government agencies.

It also said that lack of support from government agencies made it difficult for the smaller businesses to grow.

Suggesting a number of ways to overcome the problem of credit, the draft of the proposed policy has projected that the sector’s contribution to GDP would reach 35 per cent from the current 28 per cent.

It has set up 83 time-bound matrices to be implemented by ministries and divisions between 2025 and 2030 for the implementation of the proposed policy, compared to 63 in the previous policy.

Expressing doubt about the new target, Md Ali Zaman said there was lack of expertise and vision within the bureaucrats of the industry ministry to draft an effective SME policy.

Industries ministry additional secretary Mohammad Salauddin said that they were consulting stakeholders to find out merits and demerits of the proposed policy.

It will be finalised only after the consultation, added the official who looked after the wing dealing with policy, law and international cooperation.​

 

[Saif]

New SME policy with no new strategies deplorable

THIS is unfortunate that the proposed National Small and Medium Enterprise Policy 2025 offers almost no new strategies to facilitate the growth of the sector. The proposal appears to echo the strategies of the 2019 policy that failed to help the sector grow. Such a repetition of failed...

www.newagebd.net

New SME policy with no new strategies deplorable
15 January, 2025, 00:00

THIS is unfortunate that the proposed National Small and Medium Enterprise Policy 2025 offers almost no new strategies to facilitate the growth of the sector. The proposal appears to echo the strategies of the 2019 policy that failed to help the sector grow. Such a repetition of failed strategies reflects, as experts say, the government’s lack of commitment to addressing the systemic challenges that continue to hinder the growth of the medium enterprises. The policy proposal puts almost the same emphasis on the establishment of a 37-member SME council and recommends the continuation of a task force under the industries ministry. It also proposes 83 time-bound metrics, from the 63 metrics, to be implemented by ministries and divisions in 2025–2030 for the implementation of the policy. All this appears a mere bureaucratic expansion, devoid of any innovative solutions to the problems that small and medium entrepreneurs face. A lack of access to finance is one of the biggest obstacles to the growth of the sector, composed of about 7.8 million enterprises that employ about 80 per cent of workers in the informal sector. A World Bank report says that only 36 per cent of SMEs have access to formal credit, compared with 48 per cent in South Asia and 68 per cent in East Asia and Pacific.

Small entrepreneurs largely rely on loans from microfinance institutions at higher interest rates. Economists and policymakers have for long asked the authorities to ensure SME access to loans from banks and non-bank financial institutions and asked the regulatory authorities to cut the maximum interest rate in microfinance institutions, but to no avail. During the Covid-induced economic slowdown, financial institutions, as studies show, failed to disburse loans to them. Only 27 per cent of Tk 20,000 crore incentive announced by the Bangladesh Bank was disbursed. The proposed policy fails to offer any comprehensive solution to this issue. Instead, it simply iterates the need for an improved access to finance without offering clear, actionable strategies. The regulatory environment has also remained burdensome, further stymieing their growth. Issues such as complex tax structures, difficulties in trade licence renewals and the absence of one-stop services create unnecessary obstacles. The SME Foundation says that more than a half of SMEs blame complicated tax system and trade licence procedures as major hindrances. Entrepreneurs need to run to at least 34 departments to start a business. The proposed policy’s failure to address these systemic issues and continued reliance on failed strategies would leave SMEs with little hope to overcome challenges.

The government should, therefore, review the proposed policy with not only a new name but also with strategies. The policy should prioritise SME’s access to finance, simplify regulations, incentivise financial institutions for SME-friendly credit schemes and foster an ecosystem where SMEs can thrive.​

 

[Saif]

SMEs lose credit appetite in economic turbulence

How have local private sector businesses fared in recent years?

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SMEs lose credit appetite in economic turbulence

How have local private sector businesses fared in recent years?

To gain a micro-level understanding, ask the question to house yard workshops, rural handicraft units, tiny grocery stores and small leather and footwear ventures.

These businesses have been struggling for over three years, gasping for air amid a challenging economic climate.

This is because high prices have eroded consumer demand, while increased power and utility bills have increased operating costs.

Access to bank loans has also become increasingly difficult for these small ventures, officially categorised as cottage, small, and medium enterprises (CMSMEs).

Instead of easing, the situation for around 78 lakh CMSMEs across the country, which contribute one-fourth of the gross domestic product (GDP) and employ 40 percent of the total workforce, has worsened in late-2024.

On top of the stubbornly high inflation, nationwide protests, violence, curfews, recurrent flooding and punishingly high interest rates on bank loans have brought the CMSMEs to their knees.

Credit data from the central bank also shows the economic disaster facing the CMSMEs.

During the April-June period of fiscal year 2023-24, small businesses received Tk 54,526 crore in bank loans. This figure plummeted to Tk 42,950 crore in the subsequent quarter, according to Bangladesh Bank (BB) data.

Compared to the same period in FY23, loan disbursement in April-June of FY24 witnessed a 13.10 percent decline.

BB data also shows that CMSMEs borrowed Tk 2.25 lakh crore in FY24, a mere 0.46 percent increase compared to the previous year's Tk 2.24 lakh crore.

Meanwhile, private sector credit growth in November of last year reached a three-year low due to weakened credit demand, a dearth of new investment, and a surge in government T-bills and bonds.

According to Syed Abdul Momen, deputy managing director and head of SME Banking at BRAC Bank, businesses mainly seek loans for two purposes: managing operations and expanding their businesses.

"Given the current economic situation, there is little to no demand for loans aimed at business expansion," said the banker.

"Entrepreneurs are now focused on securing the minimal financial support required to meet their working capital needs," he added.

Similar to Momen, Sanjib Kumar Dey, the head of the SME and Agri-banking division at Mutual Trust Bank, said that high inflation and costly loans have compelled small businesses to shelve their expansion plans over the past three years.

"Business owners have been primarily focused on survival rather than growth," Dey said. "Banks, too, are exercising caution in lending amid the prevailing economic uncertainties."

'SITUATION IMPROVING SLOWLY'

Compared to July or August of last year, when a nationwide protest culminated in a government ouster, the current business climate and credit outlook have improved, according to Mohammad Salekeen Ibrahim, head of asset at Eastern Bank.

"Banking activities were almost shut in July and August of last year. During that period, curfews and general holidays were frequent," recalled the banker.

"Banks were unable to reach customers, and customers were likewise unable to access bank services," he added. "While the overall situation in the country has shown signs of recovery since August, it has not fully stabilised."

Ibrahim said they are looking for potential clients. However, the current business climate and high interest rates remain major obstacles.

"The loan disbursement rate may remain sluggish until the client confidence stabilises," he commented.

The high-interest rate environment is a direct consequence of the central bank's prolonged battle against stubbornly high inflation, which has been dragging on for more than two years.

In the first half of FY25, inflation averaged 10.87 percent, according to the Bangladesh Bureau of Statistics.

To curb spiralling prices, the BB has been steadily increasing the policy rate, the rate at which it lends to banks, since May 2022.

This has resulted in a gradual rise in loan interest rates, particularly after the central bank lifted the lending rate cap in July of last year.

In October of last year, the central bank raised the policy rate by 50 basis points to 10 percent. This marked the eleventh upward adjustment since May 2022, when the policy rate stood at only 5 percent.

'BUSINESSES NEED GOVERNMENT SUPPORT'

Current consumer confidence is at an all-time low, a level unprecedented in the past 30-35 years, according to Rizwan Rahman, former President of the Dhaka Chamber of Commerce and Industry.

He told The Daily Star that businesses are also grappling with rising costs, and inflation remains unmanageable.

In such an uncertain and confidence-deficient environment, businesses are hesitant to assume loan obligations, he added.

The business environment since June 2024 has been far from conducive to investment, and loan disbursement in this sector is expected to decline significantly in fiscal year 2024-25 compared to the previous year, he added.

"Without timely monetary or fiscal support from the government, reviving loan disbursement and encouraging investments in this challenging economic scenario will be almost impossible," he commented.

Melita Mehjabeen, a professor at the Institute of Business Administration at the University of Dhaka, told The Daily Star that the significant SME loan disbursements observed in 2021 and 2022 were due mainly to refinance schemes and Covid stimulus packages.

However, loan disbursements witnessed a decline in 2023 and 2024, attributed to increased prudence exercised by banks and financial institutions, she noted.

A restrictive loan ceiling of 30 percent of working capital further limited borrowers' ability to apply for fresh loans if they exceeded this limit, she added.

Moreover, the central bank's actions against loan misuse (for example, using working capital loans to repay existing debts) and the reduced lending appetite of commercial banks towards smaller borrowers have also contributed to the decline in disbursements, she added.

Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue (CPD), said that while private sector credit growth remains sluggish, SMEs are the most vulnerable in the current economic climate.

He said rising production costs, fueled by increased gas and electricity prices, coupled with high inflation, have largely eroded sales and profit margins for SMEs.

"They are struggling to meet loan instalment obligations on time," he noted, adding that these challenges are not being adequately addressed.

"With the exception of a few specific banks, SMEs are unable to access loans due to varying terms and conditions," said the economist.​

 

[Saif]

SMEs: Start locally, think globally

Since the country’s independence in 1971, small and medium enterprises (SMEs) have played a pivotal role in GDP growth, employment, income generation, and local development.

www.thedailystar.net

SMEs: Start locally, think globally

Since the country's independence in 1971, small and medium enterprises (SMEs) have played a pivotal role in GDP growth, employment, income generation, and local development. However, despite their substantial potential, most Bangladeshi SMEs struggle to transition from local markets to global trading platforms. It is embarrassing that, despite having immense potential to shine on the global stage, our entrepreneurs remain constrained by local limitations and fail to become formidable players in the international market.

Now, at the beginning of 2025, Bangladesh stands at a critical crossroads in its history. The nation must refocus its attention on SMEs from a fresh perspective. First and foremost, government support must be leveraged to help SMEs represent themselves globally. The government should expand policy support and incentivise entrepreneurs to promote SME exports on a broader scale. Entrepreneurs, in turn, should take advantage of initiatives such as export subsidies, training programmes, and trade fairs and similar entities. Additionally, the government should develop a robust business plan encompassing export strategies, target markets, and potential challenges.

Capacity building and skill development remain major barriers to global expansion. Training programmes focused on global trade, export procedures, digital marketing, and letters of credit (LC) can equip entrepreneurs with the necessary skills to succeed globally. Collaborating with institutions like the SME Foundation and trade associations can facilitate such training. In terms of capacity building, more emphasis should be placed on audiovisual content available on digital platforms. This approach can help overcome geographical barriers and support better time management for entrepreneurs. Digital tools and e-commerce platforms can also enable SMEs to reach a global audience. Entrepreneurs should invest in user-friendly websites, enhance their online presence on social media, and leverage global marketplaces.

Most Bangladeshi enterprises face significant challenges in securing adequate financing. High interest rates, lack of collateral, and limited access to alternative funding sources hinder their ability to invest in global expansion. To address these challenges, the government, NGOs, and international donors should offer more financing schemes and grants tailored specifically for SME exports. Additionally, mitigating currency risks should be a strategic priority in international trade.

For global acceptance, obtaining internationally recognised certifications, such as ISO standards, can significantly boost buyer confidence. SMEs in Bangladesh should focus on improving production processes, operational efficiency, adopting green business practices, ensuring superior quality control, and achieving high packaging standards to compete with top global players. Collaborating with international merchants, agents, and trade intermediaries can also help SMEs access new markets. Participation in global trade fairs and business matchmaking events can open doors to valuable connections.

In the context of global trade, branding with a unique selling proposition (USP) distinguishes one enterprise from another and creates demand for its products or services. SMEs should invest in building a distinctive brand identity that resonates with international audiences.

Through determination, innovation, and visionary strategic planning, Bangladeshi SMEs can overcome barriers and become competitive players on the global stage. By fostering synchronisation between the government, financial institutions, donors, NGOs, and the private sector, Bangladesh's SMEs have the potential to transform the nation into a global trading powerhouse. If we do not start thinking big now, it may never happen.

The writer is a banker​

 

[Saif]

SMEs’ share in GDP 35pc by 2030 in focus

Industries ministry has initiated framing the National SME Policy 2025, aiming to boost the contribution of small and medium enterprises (SMEs) to GDP to 35 per cent by 2030 from the current 27 per cent. The 2019 policy is the last such guideline for the SME sector. The implementation of the late

thefinancialexpress.com.bd

SMEs’ share in GDP 35pc by 2030 in focus
FE REPORT
Published :
Jan 23, 2025 08:47
Updated :
Jan 23, 2025 08:47

Industries ministry has initiated framing the National SME Policy 2025, aiming to boost the contribution of small and medium enterprises (SMEs) to GDP to 35 per cent by 2030 from the current 27 per cent.

The 2019 policy is the last such guideline for the SME sector.

The implementation of the latest policy concluded last June, with no government funding allocated to meet the demand for approximately Tk 105 billion to support the sector.

The observations were made at a workshop styled 'SME Policy-2025: Opportunities and Challenges, and the Role of Media' hosted by the SME Foundation in collaboration with the Economic Reporters' Federation (ERF) in ERF Auditorium on Wednesday.

SME Foundation chairperson Md Mushfiqur Rahman attended the event as the chief guest with ERF president Doulot Akter Mala in the chair.

Anwar Hossain Chowdhury, managing director of the SME Foundation, and Taskeen Ahmed, president of the Dhaka Chamber of Commerce and Industry (DCCI), spoke as special guest.

Speakers say data shortage, lack of financing, high interest rates, informal operations and limitations in marketing are challenges for the SME sector. Proper execution of the new policy will help boost the sector.

They also highlight that while SME's contribution to GDP in Bangladesh is about 27 per cent, it stands at 40 per cent in Pakistan, 52 per cent in Sri Lanka, 60 per cent in China and 37 per cent in India.

However, they called for implementing the new policy by boosting funds of the SME Foundation and facilitating regular meetings and decisions by committees like the National SME Development Council (NSDC) and the SME Task Force.

The workshop, moderated by ERF secretary Abul Kashem, featured a keynote address by SME Foundation general manager Mohammad Jahangir Hossain.

According to the keynote, only three out of the 10 projected meetings of the NSDC were held under the chairmanship of the then industries minister, during the implementation of the last policy.

On the other hand, only six of the 20 meetings of the National SME Task Force under the industries secretary took place.

With no funds allocated despite a demand for Tk 105.13 billion for the development of the sector, two business incubation centres were established in Dhaka and Chittagong with the Asian Development Bank's support.

A national SME training institute was set up in Agargaon, Dhaka, a national SME e-database was created and operated with own funding, and a development project proposal of Tk 229.5 million was prepared and sent to the Planning Commission, said Mr Hossain.

He said the proposed policy has 83 strategic tools and 310 activities under 10 strategic goals for the development of the SME sector.

To implement this policy, it is necessary to organise regular meetings, allocate funds, monitor the execution process, establish an office of the Foundation outside Dhaka, and strengthen the entity financially.

SME Foundation chair Mushfiq said like in many countries, the cottage, micro, small and medium enterprise (CMSME) sector is vital to Bangladesh's economy, accounting for 85 per cent employment of the industrial sector.

The Foundation has been instrumental in advancing government policies and strategies to foster the sector's growth, organising 11 national and 91 regional SME product fairs, four heritage handloom festivals, and supporting over 200 entrepreneurs at international fairs.

It has established the first-ever common facility centre at Kaluhati Footwear Cluster in Rajshahi and facilitated more than Tk 10 billion in loans for around 10,000 entrepreneurs through its credit wholesaling programme.

Meanwhile, Mr Anwar highlighted that the poor contribution of Bangladesh's CMSME sector to GDP compared to neighbouring countries.

Referring to the economic census of the BBS conducted in 2013, he said there were more than 7.81 million CMSME entrepreneurs in the country.

Since its establishment in 2007, the SME Foundation has helped around 2.0-million entrepreneurs. Despite the 2019 SME Policy, the lack of funding forced it to implement programmes with its own resources.

Taskin Ahmed highlighted financing, high interest rates, informal operations, and marketing challenges in the SME sector, and thus sought solutions.​

 

[Saif]

Aarong unveils the world’s largest craft store in Dhanmondi

Bangladesh’s leading fashion and lifestyle brand Aarong has unveiled its flagship outlet in Dhanmondi with 60,000 square feet eight spacious floors.

www.newagebd.net

Aarong unveils the world’s largest craft store in Dhanmondi
Business Desk 08 March, 2025, 22:35

Aarong executives unveil the world’s largest craft store in Dhanmondi recently. | Press release photo

Bangladesh’s leading fashion and lifestyle brand Aarong has unveiled its flagship outlet in Dhanmondi with 60,000 square feet eight spacious floors.

According to a press release, it is the world’s largest craft store which will treat the visitors with a series of monumental art installations, including a 4-storey nakshi kantha, clay pottery wall, and alchemy.

The press statement also said that every corner of this flagship outlet has been thoughtfully curated to delight shoppers, from the widest selection of handcrafted textiles to exclusive artisanal decor.

The outlet also has a restaurant named ‘Orange Parrot’ on the 7th floor of the building to serve Bangladeshi fusion cuisine.

Tamara Abed, managing director of Brac Enterprise, said that this groundbreaking destination store is a proud testament of Bangladesh moving boldly into the future.

She also said that it embodies their mission to preserve and celebrate Bangladesh’s rich artisanal heritage while delivering a world-class shopping experience.​

 

[Saif]

https://thefinancialexpress.com.bd/trade/low-export-earnings-for-poor-patronage-skills-innovation

Low export earnings for poor patronage, skills, innovation
SAIF UDDIN
Published :
Mar 15, 2025 01:00
Updated :
Mar 15, 2025 01:00

The country's handicraft sector faces multiple challenges like inadequate finance for entrepreneurs and lack of innovation in designs, compounded by skill gaps, resulting in lower-than-expected export earnings.

Besides, unorganised supply chain, limited competitiveness and weak country branding are also contributory factors for this sluggish state of the promising sector, according to industry insiders.

However, they said the sector holds huge potential on the back of buyers' focus shifted from major exporting countries like China and Vietnam due to higher cost to countries like Bangladesh.

Besides, Bangladesh is abundant in natural resources for handcrafted items and affordable labour that indicates prospects of better earnings from the sector if provided with necessary policy support.

Bangladesh's handicraft exporters' earnings have fluctuated in the past five fiscal years (FY) between FY 2020-21 and FY 2023-24, according to data available with the Export Promotion Bureau.

They got export receipts of $42.83 million in FY 2021-22 as global buyers showed special interest in eco-friendly and natural artefacts during the trying times of the Covid-19 pandemic.

However, the figures witnessed ups and downs in the next two fiscals.

Sources said during Covid pandemic global buyers reduced their spending on apparel and other items and showed increased interest in eco-friendly goods.

They said the local handicraft sector is mainly driven by jute, bamboo and cane, followed by pottery, puppetry and crafts like embroidery and tapestry.

A Bangladesh Bureau of Statistics survey shows about 44-per cent handicraft establishments are bamboo and cane-based.

As many as 73,542 handicraft establishments are in operation across the country and 97.6 per cent of them are household-based.

The industry is dominated by female entrepreneurs who own 51.2 per cent of the establishments.

Entrepreneur and former FBCCI director Rashedul Karim Munna believes the sector can fetch more foreign currencies if existing challenges are well-addressed.

Mr Munna, managing director of Creation Private Ltd, says his company exports mostly export jute diversified products as well as coconut fibre, recycled garment offcut and palm-tree straw.

Sharing an experience of a recent visit to a major global expo-Ambiente Fair-in Germany, he said international buyers are currently looking for potential countries as alternatives to China due to higher tax imposed by the Trump administration.

"All global buyers are now keeping that taxation issue in their mind. For example, a US buyer has to pay 50-per cent higher tax on average while buying from China," he said, adding that this trend paves the way for more focus on other countries like Bangladesh.

"Besides, Bangladeshi handicraft export is growing fast to EU countries, the UK and Japan, thanks to GSP facilities," mentioned Mr Munna.

One of the positive aspects of Bangladesh is comparatively lower labour cost than China as monthly average salary there has almost doubled from $300 to $600 in recent years.

"However, their productivity is much higher-almost four times-than a Bangladeshi worker," cited the entrepreneur as he explained that Chinese use modern machinery for making.

He identified Bangladesh's limitation in large-scale production and complexities related to compliance management as some challenges.

He underscored the need for country branding, establishment of large-scale production facilities, design innovation and capacity enhancement.

Sources said Bangladesh exports handicraft merchandises-the list includes handmade attires and various household items made of natural ingredients like clay, jute, cane and seaweed-to more than 50 countries.

According to a study by the global think tank Credence Research, the global demand for handicrafts was valued at $1005.49 billion in 2022 and is expected to double around $2317 billion in 2030.

The market is expected to grow at the compound annual growth rate (CAGR) of 11 per cent between 2023 and 2030.​

 

[Saif]

Falling SME sales shake economic backbone

When the Bangladesh Bank raises interest rates on bank borrowing in its battle against stubbornly high inflation, the ripple effects reach small and medium businesses run by Faridpur’s Paritosh Kumar Malo or Chuadanga’s Md Oli Ullah.

www.thedailystar.net

Falling SME sales shake economic backbone

When the Bangladesh Bank raises interest rates on bank borrowing in its battle against stubbornly high inflation, the ripple effects reach small and medium businesses run by Faridpur's Paritosh Kumar Malo or Chuadanga's Md Oli Ullah.

Already squeezed by slumping sales in response to an upward inflationary curve over the past three years, Malo and Ullah promptly shelved their business expansion plans that depend on bank loans.

If that is not enough to survive, they now go for cutting their workforce just to keep their businesses afloat.

But even desperation has its limits.

If the macroeconomic stress does not ease soon, these small ventures, which contribute 32 percent of the country's GDP and employ 85 percent of the industrial workforce, face closure.

According to the Small and Medium Enterprise (SME) Foundation, there are around 79 lakh SMEs in the country. These ventures are considered as the economic backbone of the country. But most of the businesses are struggling due to inflation and macroeconomic headwinds.

Amid the economic turmoil, the political changeover through a mass uprising last year has led to slower spending on development projects, adding another layer to the SME crisis.

Take the case of Paritosh Kumar Malo, who runs RK Metal in Faridpur. His workshop, which once employed 25 workers, produces farming machinery.

Malo said government projects were his steady clients, but as work has been halted in the past six months, he has not received any new orders.

To make matters worse, he supplied equipment worth Tk 20 lakh to a USAID-funded project. The payment is now uncertain after the new US administration announced cuts in foreign aid.

Just six to eight months ago, Malo said, his factory generated Tk 30 lakh in revenue, but that has now fallen to Tk 3 lakh.

Of that, he must repay around Tk 80,000 per month in bank loans.

Demand for small agricultural machines, once the backbone of his sales, has dropped by nearly 70 percent.

Dealers hesitate to place orders, while farmers struggle to afford new equipment. "If they don't have money, how will they buy it?" he asked.

Unable to sustain his full workforce, Malo had to lay off 15 employees. "Letting them go was painful. They have families to feed."

DEPLETING CAPITAL, LOOMING LAYOFFS

Md Oli Ullah, owner of Janata Engineering in Chuadanga, manufactures agricultural machinery such as corn threshers and mustard oil extraction machines.

Like Malo, he said demand has plummeted as farmers and small entrepreneurs are delaying purchases.

He employs more than 100 workers but fears layoffs.

"I took a Tk 5 crore loan from Agrani Bank in 2020, when the interest rate was 9 percent. Now it has risen to 17 percent, significantly increasing my quarterly repayments."

Ullah said his capital is depleting, and after Eid, he may have to lay-off some workers just to keep the business running.

Despite efforts to sustain operations, he fears that businesses like his will be forced to shut down if conditions do not improve.

Loan disbursement data from Bangladesh Bank also reflects the financial struggles of small ventures.

Loan disbursement to small enterprises dropped by 16.05 percent year-on-year in the July-September period of fiscal year 2024-25, compared with a 1.89 percent increase in the same period of FY24, according to central bank data.

Meanwhile, the cost of financing for SMEs surged to 12.12 percent in December 2024 from just 6.17 percent in June 2023, further straining businesses.

UNEXPOSED TO LOANS, YET STRUGGLING

In contrast to Malo and Ullah, Rubina Akter Munni, owner of Design By Rubina, does not have any bank loans.

She manufactures leather goods such as travel bags and jackets.

She said online, corporate, and export orders have almost disappeared over the past three months.

"Consumers are probably not spending on luxury products," she added.

"Earlier, I received export orders from expatriates and local leather exporters, but they are delaying payments due to their own business downturns," she said.

With revenue sharply down, she is struggling to pay her 71 employees. "This tough situation affects not just me but many small entrepreneurs," she added.

Some businesses have already postponed orders.

Although she finds relief in having no bank loans, running day-to-day operations is becoming increasingly difficult.

A SILVER LINING IN GOLDEN FIBRE

Ajit Kumar Das, owner of Creative Jute Textile in Narsingdi, has managed to sustain his business thanks to the steady demand for eco-friendly bags made of jute -- dubbed the "golden fibre" of Bangladesh.

While other businesses struggle, his company supplies various shops in tourist areas, and some of his bags are indirectly exported abroad.

"Basic Bank has supported me financially, and even private banks have shown interest in providing loans. As long as I maintain quality and attractive designs, there will always be demand," Das said.

His company currently employs more than 100 workers and remains one of the few thriving SMEs.

SME FOUNDATION FOR LOAN DEFERMENT

M Masrur Reaz, chairman and CEO of Policy Exchange Bangladesh, cited the Purchasing Managers' Index (PMI), which signalled a downturn in the SME sector.

He identified three main challenges: high production costs driven by inflation, disruptions to raw material imports due to the US dollar crisis, and declining consumer demand as the cost of living rises.

Anwar Hossain Chowdhury, managing director of the SME Foundation, acknowledged these challenges and emphasised that SMEs often operate with limited capital, making them vulnerable.

The foundation has urged Bangladesh Bank to grant a three-month loan deferment for SMEs.

"We are also working to create collaboration among stakeholders through fairs and conferences," he said.

"Our goal is to ease access to bank loans by connecting the banking sector, corporates, and entrepreneurs, ensuring their progress."​

 

[Saif]

Exigency of loans for CMSMEs

The sanctioning of loans for any sector of economy should ideally be decided by factors spurring economic growth. The disbursement of a sizeable percentage of the total disposable loans of banks runs the risk of distorting the natural mechanism of investment. But when it comes to patronising a fled

thefinancialexpress.com.bd

Exigency of loans for CMSMEs
FE
Published :
Mar 19, 2025 23:28
Updated :
Mar 19, 2025 23:47

The sanctioning of loans for any sector of economy should ideally be decided by factors spurring economic growth. The disbursement of a sizeable percentage of the total disposable loans of banks runs the risk of distorting the natural mechanism of investment. But when it comes to patronising a fledgling sector neglected long on account of faulty or unresponsive policies, the risk is worth taking. Cottage, Micro, Small, and Medium Enterprises (CMSMEs) with a share of 90 per cent industrial units and 80 per cent industrial employment constitute a sector that unfortunately has received a step-brotherly treatment compared to large industries. So the Bangladesh Bank (BB) has felt the urgency of righting the wrong not only in the interest of the sector but also in the interest of the country's overall economy.

As a first decisive step, the BB has made it mandatory for banks to disburse loans to CMSMEs at least 25 per cent by this calendar year with the provision of 0.5 per cent annual increase to 27 per cent by 2029. Small enterprises often cannot avail of such government supports because of their lack of collateral. Even many of such small units failed to receive incentive packages the government generously distributed in the post-Covid period as part of bringing about an economic turnaround. To circumvent this constraint the BB has withdrawn the conditions of mandatory Tax Identification Number (TIN) and collateral for enterprises to claim a loan amounting to Tk500,000. Entrepreneurs can obtain this amount on the strength of their business identification number. This is a clear case of easing the process of receiving loan for the small enterprises. Now the banks need to have a sound mechanism for assessing the small ventures' potential for sustainability and expansion of business and even marketing of products either at home or abroad. Fresh exigencies and risks should also be meticulously analysed so that the loanees cannot misuse the fund borrowed.

This country has witnessed massive loan default on account of sanctioning loans to business sharks with an ulterior motive on the part of both parties---the loan sanctioning authorities and the loan receivers. Evidence has it that the rate of defaulters among small borrowers is very low compared to their large counterparts. However, misuse of government or public funds in the name of entrepreneurship or business at no level is desirable. Let there be several monitoring and vigilant teams expert in business and industrial issues including marketing prospects which will make on-the-spot and off-the-spot assessment before recommending loans for units in the sector.

In this respect, Chinese model of CMSMEs can be helpful for emulating with some minor adjustment to the local conditions here. Specialised village-based small enterprises have been the backbone of the industrial might developed in China later on. From the smallest item such as needle, pin, gem clip to calculator to electric car---the range of industrial outputs in China puts every manufacturing country on the planet to shame. China's economy grew in leaps and bounds because of this as well as the low prices of such essential tools and goods. Somewhat regimented, the method of production hardly allows entrepreneurial failure as those are closely monitored and patronised. A congenial entrepreneurial environment can meet the dual challenge of developing a strong economic base and creation of employment for a huge army of unemployed youths in Bangladesh.​

 

[Saif]

Empowering MSME sector

The labour-intensive MSME sector (Micro, Small and Medium Enterprises) plays a vital role in Bangladesh's economic development by fostering entrepreneurship, driving sustainable technology innovation, and contributing to economic growth, employment generation, poverty alleviation, and social stabil

thefinancialexpress.com.bd

Empowering MSME sector
With strategic incentives in FY 26 Budget
Md. Abdul Latif
Published :
Mar 22, 2025 00:01
Updated :
Mar 22, 2025 00:01

The labour-intensive MSME sector (Micro, Small and Medium Enterprises) plays a vital role in Bangladesh's economic development by fostering entrepreneurship, driving sustainable technology innovation, and contributing to economic growth, employment generation, poverty alleviation, and social stability. According to the 2019 manufacturing survey by the Bangladesh Bureau of Statistics (BBS), MSMEs represent 93.81 per cent of industrial output and employ over 32.85 per cent of the workforce. In the fiscal year 2022-23, the sector contributed 38.51 per cent to value addition and 24.45 per cent to GDP. However, the sector has faced significant challenges due to the Covid-19 pandemic, with many small businesses shutting down due to lack of capital. The expansion of MSMEs is hindered by inadequate infrastructure, limited financial support, technological lag, market entry barriers, and a shortage of skilled labour, threatening the sector's viability. Increasing financial incentives in the 2025-26 budget, such as MSME-friendly tax policies, credit facilities, VAT concessions, interest reductions, and tax exemptions, could be crucial in creating jobs and encouraging investment by boosting productivity and competitiveness. This article explores the necessity and significance of these financial incentive strategies and their potential impact.

COMPARATIVE ANALYSIS OF MSME SECTOR CONTRIBUTIONS IN BANGLADESH AND OTHER COUNTRIES: According to the SME Policy 2019, there are approximately 7.8 million MSME industries in Bangladesh, providing direct and indirect employment to around 21 million people. The SME Foundation reports that in the fiscal year 2022-23, investment in the MSME sector was merely 27,560.27 crore taka (2.75 billion dollars), representing only 0.61 per cent of the GDP, which totaled about 4,490,842 crore taka (451.53 billion dollars). In contrast, the MSME sectors in India, China, and Japan contribute 80 per cent, 60 per cent , and 69.5 per cent to their respective GDPs, significantly surpassing Bangladesh's figures. In Germany, small and medium enterprises constitute the majority, accounting for 82 per cent of employment and contributing 17 per cent to value added. Additionally, in the Asia-Pacific region, MSMEs in China and India contribute over 40 per cent of total exports, compared to 26 per cent in Thailand, 19 per cent in South Korea, and 16 per cent in Indonesia. This comparison underscores the critical role of the MSME sector in both developed and developing economies, highlighting the need for special initiatives and policy support in Bangladesh to enhance the sector's contribution and improve overall economic and export capacity.

FINANCIAL INCENTIVE STRATEGIES FOR MSME SECTOR: In a market economy, small businesses often struggle against larger competitors that can monopolise the market, utilising information advantages to stifle MSME entry. To protect and sustain small businesses, special measures are essential. According to the structural transformation theory and the inclusive growth model in development economics, the MSME sector plays a crucial role in economic development by decreasing income inequality, creating opportunities for mobility, and broadly distributing economic benefits. To bolster the MSME sector's competitiveness, a variety of financial incentive strategies should be implemented at both public and private levels. These strategies aim to enhance MSME productivity and facilitate growth by lowering financial and administrative barriers.

LOW-INTEREST LOANS AND CONSULTING SERVICES FOR NEW ENTREPRENEURS IN EXPORT-ORIENTED MSMES: The government and Bangladesh Bank can collaborate to establish a refinancing fund, offering partial credit guarantees to commercial banks for loans to export-oriented SMEs under favourable terms. This can include direct low-interest loans through specialised institutions that assist in adopting eco-friendly technologies and modern equipment. Additionally, providing consultancy services can help new MSME entrepreneurs improve product quality, create market connections, and enhance international marketing capabilities. With low-interest financing, export-oriented SMEs can elevate product quality while adhering to global standards and invest more in marketing. Such loans enable new entrepreneurs to expand their operations cost-effectively and invest in innovative technologies, leading to product diversification and improved quality. Ultimately, this development will generate new employment opportunities, alleviating unemployment in both rural and urban settings.

TAX LIABILITY REDUCTION : The MSME sector primarily faces income tax and VAT obligations. Given their lower annual turnover, reducing tax liabilities for these businesses can ease the financial burden on MSME entrepreneurs, helping them compete with larger firms and expand. Tax assistance can enhance the investment climate, promoting new ventures and projects. By offering tax breaks for research and development (R&D), employee training, and environmentally friendly technologies, the tax liability for MSMEs can be reduced. Studies indicate that tax incentives in the U.S. and Canada significantly alleviate MSME tax burdens. Supporting R&D will foster innovation and competitiveness, while tax incentives for employee training will cultivate a skilled workforce, boosting productivity and performance. Investments in eco-friendly technologies will encourage sustainability within the sector, contributing to long-term environmental protection. Overall, tax relief for MSMEs will stimulate sector growth, job creation, and economic development.

CLUSTER-BASED REGIONAL INCENTIVES: Recognising MSMEs as priority sectors, specific clusters (e.g., light engineering, foundry-based MSMEs) may be eligible for reduced corporate tax rates or tax holidays. These clusters produce agricultural machinery parts, vehicle spare parts, and metal components for local and international markets, such as the light engineering clusters in Bogra or plastic manufacturing in Dholakhal (Dhaka). Criteria like environmentally friendly practices, minimum local value addition, and cluster association membership may be established for qualifying MSMEs. The National Board of Revenue (NBR) could approve tax holidays or reduced rates for compliant MSMEs. Such incentives will enable clusters to upgrade machinery, expand production, and remain competitive against imports, while enhancing the overall size and effectiveness of the cluster. Linking incentives to MSME clusters will further lower operating costs, improve resource sharing, increase productivity, ensure quality control, and enhance worker skills.

PREFERENTIAL TAX REGIME (PRT) BENEFITS FOR LABOR-INTENSIVE MSMES: The government's Preferential Tax Regime (PRT) for labour-intensive micro, small and medium enterprises is a special tax benefit that provides tax reduction, tax exemption or easier tax treatment to labour-intensive or employee-dependent enterprises. In this case, handicraft and cottage industries that employ a relatively large number of workers can get a minimum tax rate or some tax exemption. For example, if an investment is made in labour-intensive industries in the handicraft and cottage industries sector or if the activities or production capacity of the MSME is increased and the employment target is met within a certain period, the government can provide tax exemption as an expansion benefit. For example, if the enterprise starts on a small scale and gradually increases the number of employees and invests in new production lines, the enterprise can come under the scope of tax exemption related to increased production facilities. The Preferential Tax Regime benefit can play a very positive role for MSMEs. Because it reduces production costs somewhat, increases investment interest, and significantly increases local employment opportunities. This will increase the government's total revenue collection from MSMEs, as well as the contribution of MSMEs to GDP.

In conclusion, ensuring transparency and proper verification in selecting MSME beneficiaries for financial incentives is crucial. Strong policies and monitoring frameworks must be established. Regular evaluations using modern technology should maximize the use of incentive funds. During the 2025-26 fiscal year, effective distribution of credit facilities, tax exemptions, and incentives to new and export-oriented enterprises will support MSME sector expansion, job creation, and economic growth.

To make these steps fruitful, it is important for the National Board of Revenue, MSME Foundation, banks and financial institutions to play a responsible role, prevent corruption and use new technologies, provide training and consultancy services to entrepreneurs. Overall, such planned support to the MSME sector will accelerate sustainable growth and social development in the national economy.

Dr. Md. Abdul Latif, (PhD in Development Policy) Global Ambassador & ADB-JSP Scholar, Additional Director, Bangladesh Institute of Governance and Management (BIGM).​

 

[Saif]

IFRS to help SMEs have access to easy investment: Taskeen

The International Financial Reporting Standards will strengthen access to finance and investment, boost global competitiveness and reduce the risks of financial misreporting...

www.newagebd.net

IFRS to help SMEs have access to easy investment: Taskeen
Bangladesh Sangbad Sangstha . Dhaka 22 March, 2025, 23:22

The International Financial Reporting Standards will strengthen access to finance and investment, boost global competitiveness and reduce the risks of financial misreporting.

Taskeen Ahmed, president of Dhaka Chamber of Commerce and Industry, said this at a focus group discussion on ‘Implementation of IFRS for SMEs’ held at DCCI in the capital on Saturday.

He said SMEs are the lifeline of Bangladesh’s economy contributing over 25 percent to the GDP. He also said the adoption of ‘International Financial Reporting Standard’ (IFRS) for SMEs provides a structured framework that enhances financial transparency, said a press release.

The DCCI president said IFRS would significantly impact tax revenue collection by improving compliance, minimizing tax evasion and bringing more businesses into the tax net.

He also termed that limited financial capacity, shortages of skilled manpower and compliance cost creates barriers in adopting IFRS for SMEs. Taskeen stressed on the need for more investment in training and regulatory alignments.

Mohammad Abu Yusuf, chairman (Acting) of Financial Reporting Council, said IFRS is very important for SMEs to comply with the international standards, but its implementation is still challenging for the SMEs due to lack of knowledge, skilled workforce, easy procedures and awareness.

There is no alternative to enhancing the capacity of SMEs to make them interested in implementing IFRS, he opined. ‘SMEs need to be more focused on IFRS implementation to increase tax compliance, access to capital from the capital market, and signing international trade agreements,’ Yusuf added.

Md Amir Uddin, executive director of Bangladesh Bank (BB), said the implementation of IFRS should be focused on improving the image of local SME entrepreneurs in the global arena, but it is necessary to provide training to improve their skills. They should be well aware of the benefits of implementing IFRS as well, he added.

Nawshad Mustafa, director of SME and Special Programmes Department of Bangladesh Bank, said they have a lack of trained and skilled accounting professionals in the country especially for SMEs.

‘To implement IFRS in a practical manner, an enabling environment is necessary for this,’ he said adding that IFRS is implemented in 80 countries in the world and it is also required to implement but that should be without affecting the business activities of the SME sector.

Nawshad again stressed for a friendly environment for its implementation.

Mohammad Jahangir Hossain, general manager of SME Foundation, said from SME Foundation accounting software were provided to few SME entrepreneurs, but it was not implemented in many cases due to lack of skills and interest.

He then proposed sector-based customized accounting software for the SME sector to make it easy. Later, he emphasized on providing facilitation and training for further implementation of IFRS.

Sk Md Tarikul Islam, partner of Hoda Vasi Chowdhury and Co Chartered Accountants, presented the keynote paper. ‘Capacity building, training for accountants and auditors and initial transition costs are some of the challenges for implementation of IFRS,’ he said.

Regulatory bodies, professional organisations, and financial institutions can play a vital role in facilitating a smooth transition, he added.

He also highlighted key benefits of IFRS for SMEs such as simplified reporting, cost-effective compliance, enhanced credibility and facilitating growth.

Tarikul, however, urged for easy access to finance, lower tax and vat rate, reduced tax rate for green business, tax incentive for SME startups and simplification of tax payment process for the SME sector.

Speaking at the open discussion, DCCI convener Lutful Hadee said there are about 2,200 chartered accountants in the country, out of them about 600 are in practice.

Moreover, about 40,000 part-qualified accounting professionals are also in the market after completing various pertinent courses.

DCCI’s joint convener Md Shafiqul Alam urged for uniformity in the definition of SME in different policies and regulations of different institutions.

DCCI’s senior vice-president Razeev H Chowdhury and Vice-president Md. Salem Sulaiman were also present at the meeting.​

 

[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.​

 

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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."​

 

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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.​

 

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Lack of information, investment take toll on SME exports

The lack of information and proper investment was taking a toll on the export potential of the country’s small and medium enterprises sector...

www.newagebd.net

Lack of information, investment take toll on SME exports
Saddam Hossain 23 June, 2025, 22:54

The lack of information and proper investment was taking a toll on the export potential of the country’s small and medium enterprises sector.

Industry insiders said that, although the sector employs more than 25 million people, the export earnings from this sector remain unknown, as there is no dedicated category for it.

Moreover, insiders also stated that the complexity of obtaining certificates, identifying and selecting suitable information on external markets, and developing overseas contracts was a hindrance to entering export markets.

Shopna Rani Sen, the owner of jute and jute goods manufacturer Rangpur Craft, which exports items to the UK, Germany, and some Asian countries,

Talking to New Age, she said that due to the lack of paperwork, such as licenses and certificates, and proper information, several SME entrepreneurs couldn’t enter the export market on a large scale.New age fashion

‘We couldn’t contact the buyers properly. Moreover, the issue at the outside of Dhaka is even worse,’ she added.

Moreover, the entrepreneurs also have some shortcomings, such as production capacity, she added, noting that if a buyer ordered a bulk import, they couldn’t fulfill the orders due to a lack of production capacity.

‘The entrepreneurs also have reluctance in exporting due to those mentioned reasons. Moreover, lack of investment and finance are also responsible,’ she added.

According to the International Finance Corporation, the SME sector faced a financing gap of $2.8 billion.

Md Oili Ullah, owner of Janata Engineering, told New Age that, apart from the information gap, one of the major problems facing SME exports is product quality.

‘Our entrepreneurs primarily focus on domestic market as they have lack of knowledge about global market. As there isn’t enough investment and banking support, we can’t import updated machinery,’ he added.

For this reason, the quality of the products did not meet the global standard.

‘The government should take policy on this, especially in smoothness of information and certification and access to finance,’ he added.New age fashion

He also said that the they have to pay more tax, ranging 27 per cent-60 per cent, in importing capital machinery and raw materials, which more than the finished products.

Rehana Akter, owner of Clay Image, a craft enterprise, told New Age that the interruption in gas supply also impacted them.

‘Sometimes we get big orders from our buyers but we couldn’t receive those as we haven’t enough capacity,’ she added.

She also said that the complexity in the documentation, proper information, and certificates were also hampering their export aspirations.

According to data from the Export Promotion Bureau (EPB) and the National Board of Revenue (NBR), Bangladeshi exporters export about 800 types of products to more than 100 countries.

However, there is no comprehensive data specifically on SME exports.

The industry insiders said that the sector accounted for about 25 per cent of the country’s total exports and about 1,500 enterprises were currently involved with exports.

In the financial year 2024-25, Bangladesh exported goods worth $44.46 billion to its global destinations.

Bangladesh Bureau of Statistics (BBS) figures showed that there were over 7.8 million cottage, micro, small and medium enterprises (CMSMEs) across the country, making up more than 99 per cent of all industrial enterprises.

The sector provided about 85 per cent of jobs in the industrial sector, employing more than 25 million people, said the BBS.

The sector contributed 28 per cent of the country’s total GDP.

The SME Foundation also acknowledged the challenges the sector faced over the years.

They said that due to the limited access to finance, lack of knowledge and skill regarding export process, customs, e-commerce and marketing, and global standards, the sector lagged.

Moreover, they have also lack knowledge in packaging, labeling, and traceability.

Recently, the foundation has taken an initiative titled Readiness for Internationalization through Skill Enhancement (RISE) through which it would enhance skills, knowledge, and business networking to increase SME exports.

Speaking to New Age, Md Anwar Hossain, vice president of the EPB, said that they are conducting major work to fill the gap in SME information and support market expansion.

Once the work is completed, the SME sector would benefit from certifications, information, import of raw materials, and other facilities related to export.

Speaking to New Age, Prof. Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue (CPD), said that SMEs in Bangladesh have untapped potential for export growth.

He said that the government should provide proper facilities to SMEs that want to export, including building a comprehensive database, conducting market-based research for SME entrepreneurs, and supporting their product lines.

He also urged the government to address the common hurdles that SMEs face, such as difficulties in accessing finance, cumbersome paperwork, technological shortcomings, and a lack of competitiveness.​

 

[Saif]

MSMEs face financing gap of $2.8 billion

Micro, Small, and Medium Enterprises (MSMEs) Day 2025 will be observed in Bangladesh today (Friday) along with the rest of the world. Recognising the critical role of MSMEs worldwide, the United Nations (UN) announced June 27 as the International MSME Day in 2017. The theme of the MSME Day 2025 i

thefinancialexpress.com.bd

MSMEs face financing gap of $2.8 billion
MSME Day today

FE REPORT
Published :
Jun 27, 2025 08:40
Updated :
Jun 27, 2025 08:40

Micro, Small, and Medium Enterprises (MSMEs) Day 2025 will be observed in Bangladesh today (Friday) along with the rest of the world.

Recognising the critical role of MSMEs worldwide, the United Nations (UN) announced June 27 as the International MSME Day in 2017.

The theme of the MSME Day 2025 is "Enhancing the role of MSMEs as drivers of Sustainable Growth and Innovation".

The MSMEs Day 2025 provides an opportunity to acknowledge the pivotal role MSMEs play in fostering economic growth, generating jobs, and making the nation resilient and competitive.

In Bangladesh, Cottage, Micro, Small, and Medium Enterprises (CMSMEs) are essential for economic development. They significantly contribute to national income, create jobs, and help achieve Sustainable Development Goals (SDGs) like eradicating poverty, promoting gender equality, and empowering women. The government recognises CMSMEs as a key driver of industrialisation.

With approximately 7.9 million SMEs in Bangladesh, CMSMEs contribute about 25 per cent to the national economy and generate 40 per cent of overall employment, according to sources. They account for nearly 80 per cent of total industrial employment and about 90 per cent of industrial units in the country, adding 45 per cent value to the manufacturing sector. Despite their vital role, CMSMEs face a financing gap of US$ 2.8 billion, with only 10 per cent accessing bank finance.

ILO Director-General Gilbert F. Houngbo highlighted the crucial role of MSMEs in creating jobs and advancing social justice.

He calls for bold, coordinated action to empower MSMEs through inclusive policies, better access to finance, skills, innovation, and decent work.​

 

[Saif]

Strong SMEs stressed to foster economy

A strong and globally standard small and medium enterprises sector is a must to foster an innovative, inclusive and sustainable national economy, said experts...

www.newagebd.net

Strong SMEs stressed to foster economy
Staff Correspondent 29 June, 2025, 19:58

Chief adviser’s special envoy for international affairs Lutfey Siddiqi, BIDA executive chairman Chowdhury Ashik Mahmud Bin Harun, CPD distinguished fellow Debapriya Bhattacharya, SME Foundation chairperson Md Musfiqur Rahman, managing director Anwar Hossain Chowdhury, industries secretary Md Obaidur Rahman and ILO Country Office, Bangladesh officer in charge Pedro Jr Bellen are present at an event marking the International MSME Day 2025 in the capital Dhaka on Sunday. | Press release

A strong and globally standard small and medium enterprises sector is a must to foster an innovative, inclusive and sustainable national economy, said experts.

They also said that sufficient governmental supports and a strategic priority of industrial policy were mandatory to strengthen the capacity of the SME sector of the country.

They were speaking at an event celebrating International MSME Day 2025, organised by the SME Foundation in cooperation with the International Labour Organisation in the capital Dhaka on Sunday.

At the event, Lutfey Siddiqi, special envoy for international affairs to the chief adviser, said that the government will provide all necessary support to youths, who can harness their skills to become SME entrepreneurs.

He said that prioritising small and medium-sized enterprises sector and entrepreneurial development was important in the country’s current economic strategy.

Lutfey Siddiqi said that if the entrepreneurs could maintain global standards, their businesses would be competitive.

‘Strengthening global networking is essential for the development of the MSME sector to increase international access,’ he added.

He stated that, in this regard, entrepreneurs required support in participating in international trade shows, achieving standard certification and receiving incentives to promote export-oriented SMEs, along with access to digital export platforms.

On June 27, Bangladesh observed International MSME Day 2025 with a series of events under theme of ‘Enhancing the Role of MSMEs as Drivers of Sustainable Growth and Innovation. ’

The United Nations designated June 27 as MSME Day in 2017, highlighting the sector’s crucial role in achieving Sustainable Development Goals.

By 2030, the world would need 600 million jobs, with seven out of every ten created within the MSME sector.

Globally, the MSMEs contribute to 90 per cent of businesses, 60-70 per cent of employment and 50 per cent of GDP, the UN said.

In his speech, Chowdhury Ashik Mahmud Bin Harun, executive chairman of the Bangladesh Investment Development Authority, emphasised the importance of strengthening the SME sector to foster an innovative, inclusive and sustainable economy.

‘SME and investment are complementary to each other and through its one stop service centre, the BIDA has brought multifaceted assistance for the sector, including trade licence, VAT and tax registration, investment registration, application for gas, water and electricity and others,’ he added.

He said that the large-scale industrial sector of the country usually faced complexity regarding backward linkage.

‘If we can establish a skilled, innovative and standard SME sector, it would accelerate the competitiveness of large-scale industries,’ he added, saying that strengthening the capacity of the SME sector should be a strategic priority of industrial policy.

SME Foundation chairperson Md Musfiqur Rahman stated that the foundation had served over two million entrepreneurs directly and indirectly since its inception, including 2,50,000 direct beneficiaries, with 55 per cent being women entrepreneurs.

‘Through the Credit Wholesaling Programme launched in 2009, we disbursed over Tk 1,010 crore to nearly 11,000 entrepreneurs, at least 25 per cent of whom are women,’ he added.

He also emphasised the foundation’s ongoing efforts in creating new entrepreneurs, enhancing skills and capacities, promoting ICT-friendly business practices and advocating for policy support to strengthen the SME sector.

However, he noted, due to financial and institutional limitations, the foundation cannot fully meet nationwide demand, highlighting the need for government support.

Meanwhile, the UN also acknowledged that access to finance remained a major challenge, with 41 per cent of entrepreneurs in least-developed countries, 30 per cent in middle-income countries and 15 per cent in high-income countries facing difficulties in obtaining loans.

Centre for Policy Dialogue distinguished fellow Debapriya Bhattacharya said that the SME sector played a pivotal role in the national economy.

He urged political parties to explicitly outline their plans for SME development in their upcoming election manifestos, emphasising that political commitment was crucial for progress in this sector.

Industries secretary Md Obaidur Rahman and Pedro Jr Bellen, officer in charge of the ILO Country Office, Bangladesh, also spoke at the event, where Anwar Hossain Chowdhury, managing director of the SME Foundation, delivered welcome remarks.

On the sidelines of the event, the Asia Foundation organised a daylong product exhibition for women entrepreneurs, where 70 entrepreneurs showcased their products.​