57% of SME entrepreneurs find tax structure as major barrier
An study by the SME Foundation has revealed that 57 per cent of small and medium enterprise (SME) entrepreneurs consider the tax structure the biggest obstacle to operating businesses legally.
Additionally, 54 per cent identify challenges in the trade license renewal process as a barrier, while 51 per cent cite the high cost of obtaining a trade license.
The findings were shared at a seminar titled "Informal SMEs in Bangladesh: Challenges of Formalisation and the Way Forward", held on Sunday (November 24) at Tourism Building in Agargaon of Dhaka.
The event was jointly organised by the SME Foundation and Friedrich-Ebert-Stiftung (FES) Bangladesh.
Key highlights
Complex Regulations: 44 per cent of entrepreneurs pointed to the complexity of government laws and regulations as another major hurdle to formalising their businesses.
Willingness to comply: Over 74 per cent of SME entrepreneurs expressed their willingness to operate in compliance with the law if the processes were simplified or if services such as one-stop solutions and collateral-free loans were introduced.
Comparison with neighbouring countries: The study noted that in India, only seven certificates from government departments are required to legally operate a business, compared to at least 34 certificates in Bangladesh.
The keynote presentation was delivered by Dr Melita Mehjabin, a professor at Dhaka University, who highlighted the informal nature of most SME enterprises in Bangladesh.
According to a 2013 survey by the Bureau of Statistics, over 7.8 million CMSME enterprises operate in the country, employing approximately 25 million people. However, the majority remain outside the legal and tax frameworks.
Industries Adviser Adilur Rahman Khan attended the event as the chief guest, with Industries Senior Secretary Zakia Sultana as a special guest. The seminar was chaired by SME Foundation Managing Director Anwar Hossain Chowdhury.
Dr Felix Gerdes, Resident Representative of FES Bangladesh, and Gunjan Dallakoti, Programme Head of ILO Bangladesh also spoke at the event.
Recommendations
Experts at the event proposed a comprehensive strategy to formalise SMEs, including:
- Simplifying laws and regulations.
- Introducing financial and non-financial incentives.
- Providing collateral-free loans.
- Streamlining bureaucratic processes through one-stop service centers.
The study gathered data from 304 entrepreneurs across Dhaka, Chattogram, Sylhet, Khulna, and Rajshahi.
The seminar brought together SME entrepreneurs, government officials, representatives from financial institutions, researchers, and economists to discuss the challenges and potential solutions for formalising Bangladesh's SME sector.
