Photo : Collected
Despite its tremendous success, SME still has not gained recognition in Bangladesh. The word ‘SME’ is one of the buzzwords. There is no such existence of SMEs in the Bangladesh economic review prepared and published by the Ministry of Finance during the announcement of the national budget every year. The moment we hear about SME, we picture an organisation filled with illiterate people from villages who work as farmers and/or something related to agriculture. We have yet to discover its potential.
The contribution of large and medium industries is shown together, whereas the contribution of small industries is mentioned separately. The situation demands SMEs to be built in near future. We actually need SMEs since there are only a few companies that are dominating the market right now. We do not have any ideas. We use the products which are used outside Bangladesh. We do not give a chance to a rising idea unless it is already accepted outside.
The contribution of the large and medium industries to GDP was 13.37 per cent while that of small industries alone was 5.23 per cent in 2011-2012, as per the economic review 2014. The figure was 11.29 per cent and 4.67 per cent in 2002 and 2003 respectively. This reflects that the contribution of small industries has increased by only 0.55 per cent in the last seven years, which is actually negligible. The contribution of large and medium industries has increased by 2.44 per cent.
Some people have started to recognise its potential. As a result, we have seen an increase in the number of SMEs. To keep it healthy, the government has taken some initiatives like SME financing or banking.
SME banking and financing in Bangladesh
Banks under the Bangladesh Bank work for financing the SME businesses. They help the entrepreneurs finance their businesses through giving short-term loans, credit loans, bank overdrafts, counselling, and many more. The banking programmes that are performed by the bank to support SME businesses are known as SME banking.
Role played by Bangladesh Bank
The Bangladesh Bank has already taken some important programmes and schemes to develop the SME sector. It has taken many steps like opening dedicated desks for SME and SME service centres in the banks and providing special facilities for the women entrepreneurs to ensure institutional financial facilities under easy conditions. It has opened a new department named “SME and Special Programs Department” to support SMEs.
The guidelines formulated by the newly created department for compliance of the banks and financial institutions for the development of the SME sector are enumerated below:
1. For the first time in Bangladesh, an indicative target for SME loan disbursement has been set for 2010 by the banks and financial institutions considering SME development as one of the most important development agenda of the country. According to the target, SME loan shall be disbursed to the small, medium and women entrepreneurs.
2. Following the “area approach method,” banks/financial institutions will try to attain their indicative targets separately by dividing it as branch-wise, region-wise and sector-wise.
3. Each bank/financial institution shall follow a separate business strategy in financing SME loan with the least formalities in executing documentation to ensure easy and speedy loan sanction and disbursement process.
4. Priority shall be given to small entrepreneurs.
5. For small entrepreneurs, credit limit will be ranged from Tk 50,000 to Tk 50,00,000.
6. For more participation of women entrepreneurs in the industrial development of the country and conducting business activities by women entrepreneurs in large numbers, priority has to be given to potential women entrepreneurs in respect of SME credit disbursement.
Analysis of SME
1. Strength: Legal mandate with a single mission for the development in the country where it is described the foundation is entrusted with the power to work independently for the development of the SME sector of the country as per the government gazette. The mission and objective are very well-defined. It also approaches to be followed to accomplish.
Again, it is also described as the diversified manpower commensurate with different facets. Though the current manpower of the foundation is not adequate, the composition is commensurate with the multi-faceted task requiring expertise on finance, economics, public relations, and engineering for the development of the SME sector.
2. Opportunities: Here it is described adequately sensitised environment and political endorsement. The importance of the SME sector is well-recognised in all planning documents. All medium- and long-term plans acknowledged the potential role of SMEs to enhance growth and poverty alleviation in the country. The formation of the SME Foundation itself reflects the commitment of the government to the development of a vibrant SME sector. All these provide a favourable ground for the SME Foundation to pursuit mandate.
3. Weakness: Insufficient finance may be the weakness of SME banking. The earning on the endowment is not adequate to undertake different activities by the foundation. Total proceeds earned from the endowment fund, which is dependent on the market rate of interest, which varies over time. This makes the overall planning critical.
4. Threat: Despite the SME Foundation setting up with a number of objectives as its mandate, it is yet to mark notable success. The financing will not be able to accomplish the objectives of developing a vibrant SME sector as envisioned in different planning documents of the government if this situation continues.
Messenger/Fameema
