SME entrepreneurs struggle for survival

Small and medium enterprises (SMEs) in Bangladesh are grappling with a severe crisis. 

High inflation, soaring interest rates, rising dollar value, and poor law and order have dampened demand, pushing small-scale traders to the brink. 

The survival of these businesses, which form the backbone of the country’s economy, is now a formidable challenge.

SMEs play a vital role in driving employment, fostering new entrepreneurs, and increasing industrial competition. 

Yet, despite their potential, these industries often remain outside the economic mainstream, facing numerous challenges like limited access to finance, lack of proper training, inadequate investment, and difficulty breaking into export markets.

The entrepreneurs in this sector also struggle with limited income and savings, as well as a low tolerance for risk. Other barriers include unreliable electricity and gas supplies, infrastructural inadequacies, and competition with foreign products. 

Recently, Industries Adviser Adilur Rahman Khan sought support from the World Bank to protect small industries and encourage new entrepreneurship.

A sector in crisis  

According to the 2016 Bangladesh Industrial Policy, businesses employing between 16 and 300 people are classified as micro, small, and medium enterprises (MSMEs). These enterprises cover 33 sub-sectors of products and services.  

Data from the 2019 Industrial Sector Survey revealed that 93% of the country’s 46,291 industrial establishments are MSMEs. Despite being a substantial part of the economy, contributing 31.5% to employment and 4.85% to GDP, these enterprises are faltering. 

Worldwide, SMEs account for 90% of businesses and over 50% of employment, and in Bangladesh, they play a critical role in job creation. 

The Bangladesh Bureau of Statistics estimates that around 8 lakh SMEs provide employment to 87% of the country’s workforce, contributing to economic growth and poverty alleviation.

However, the 2019 SME Policy, aimed at protecting this sector, expired in June 2023, leaving many objectives unfulfilled.

The road ahead  

Access to finance remains one of the most significant challenges for SMEs in Bangladesh. The country’s banking sector, worth around $150 billion, cannot meet the $2-3 billion demand from SMEs. Complications in securing loans due to inadequate documentation and the informal nature of many businesses further exacerbate this problem.  

Ashraf Ahmed, President of the Dhaka Chamber of Commerce and Industry (DCCI), noted that declining production indices are hitting small and medium enterprises hard. 

“While macroeconomic improvements will take time, expanding credit flows can offer immediate relief,” he said. 

Ashraf also mentioned that Bangladesh Bank’s credit guarantee schemes could help alleviate financial pressure on entrepreneurs.

Despite a slight dip in inflation in September, the sector is still under immense pressure, primarily due to the government’s new monetary policy. 

"The lack of working capital has led to reduced investment and production," Ashraf said, emphasising that the economy cannot thrive without strengthening SMEs.

Coordination and policy reform  

Rashedul Karim Munna, a Director of the SME Foundation, pointed out that 17 government agencies are involved in SME-related projects, but their efforts are often fragmented. 

Projects are planned five to seven years in advance, with funds frequently wasted due to lack of coordination. He stressed the need for a review of the SME policy, calling attention to the gaps in the current framework.

Rashedul also highlighted the contribution of SMEs to the GDP of neighboring countries, which ranges between 60-70%. To achieve Bangladesh’s $3 trillion economic target by 2041, he suggested the establishment of a dedicated SME Bank. 

Additionally, he recommended increasing import duties on locally produced goods and focusing on product-based professional training to boost productivity.

"Product design, training, and technology need to be integrated coherently to enhance efficiency and competitiveness," added Rashedul.

Entrepreneurial struggles  

Launching a new business in Bangladesh is a daunting task, particularly for small entrepreneurs. Challenges range from raising capital and securing essential documentation to acquiring raw materials, navigating bureaucratic hurdles, and marketing products.

Aktaruzzaman Tushar, the owner of Jutex, a jute-based enterprise, shared his journey: “I always wanted to do something with jute, but I faced significant challenges, like finding skilled workers and obtaining loans. With enough support, more entrepreneurs like me could thrive in this sector.”

As small and medium enterprises fight to stay afloat, the need for stronger policy support, better coordination, and greater access to finance has never been more urgent. 

Only with sustained efforts can this vital sector realize its potential and contribute meaningfully to Bangladesh’s economic future.