A number of workers in the country's MSMEs have lost their jobs while another large number remain vulnerable with a sharp drop in sales
The need to connect micro, small and medium enterprises (MSMEs) to banks for ensuring a steady flow of funds is imperative for the country's SME sector to truly flourish.
Alongside, relevant policies, skills, and innovation in products may further help them to meet their existing challenges stemming from the ongoing Covid-19 pandemic.
Prof Masudur Rahman, chairperson of the SME Foundation told Dhaka Tribune about it in an interview on the eve of observation of International MSME Day on June 27.
Losses incurred due to Covid-19
A number of workers in the country's MSMEs have lost their jobs, either temporarily or permanently, while another large number remain vulnerable with a sharp drop in sales due to the impact of Covid-19, Rahman stated.
The ongoing pandemic had hit the SME sector the hardest, compared to all the other sectors.
Entrepreneurs suffered blow after blow as they missed crucial revenue from major festivals including Pohela Boishakh, the Eids, and Pujas, beginning from last year's March.
Although things began to turn around for the better from the third quarter of 2020, a fresh wave from the beginning of this year put the MSMEs in dire straits again.
Still a major portion of the entrepreneurs are in vulnerable situations. Their problems, especially regarding marketing of their products, are suffering due to district-level lockdowns here and there, lamented the SME Foundation chairman.
Challenges SME sector faces frequently
There are a number of challenges the SME sector faces frequently. Among them, the biggest challenge is funding.
More than 75% of SME entrepreneurs are still unbanked and, in some cases, they are ineligible due to lack of proper documents.
Most of the entrepreneurs run their business through informal means and they arrange capital by themselves or from relatives.
A number of entrepreneurs do not even possess any trade licences.
Moreover, lack of capacity, skills, product innovation, and product design, not to mention lack of new technologies are also some major challenges.
Cost of doing business is also rising in this sector.
They cannot access the policymakers, cannot access the market easily and even cannot get fair prices for their products, said Masudur Rahman.
Maintaining the supply chain is also a big challenge.
Overcoming the challenges
To ensure the flow of capital and funds, the SME sector needs an alternative organic financial structure. Moreover, policymakers need to work on solving all these problems to ensure equal opportunity for all entrepreneurs, he suggested.
The SME Foundation has already initiated training of entrepreneurs in banking knowledge to bring them under financial inclusion.
"We have set up two incubation centers in Dhaka and Chittagong for SME entrepreneurs and we have also arranged training for them. Through the SME Foundation, we have started building a database for entrepreneurs in different SME clusters.
The sector ensured 80% of employment of the country's industrial sector and contributed 25% in GDP. We are on track to contribute 32% of GDP by 2024 set by the government."
"If we can increase investment in skills development, ensure fair prices, and bring the sector under full formalities and institutionalization, all the challenges can be met," Rahman also said.
Proposed budget and SME sector
This year’s budget is business-friendly. The finance minister paid special attention to the SME sectors like light engineering, agriculture, agro-processing industries, and dairy farms - which are some of the major components of the SME industry, Masudur Rahman stated.
The proposals of VAT exemptions, customs duty, and other taxes will boost the development of small entrepreneurs and the economy, he further said.
The proposal to tax exemption for women SME entrepreneurs with less than Tk70 lakh annual turnover will undoubtedly encourage more women entrepreneurs, he added.
Bangladesh observed the International MSME Day
Meanwhile, SME Foundation observed International MSME Day jointly with UNIDO on June 27 for the first time.
Industries Minister Nurul Majid Mahmud Humayun was the chief guest at the webinar while SME Foundation Chairperson Prof Dr Masudur Rahman presided over the program.
In the welcome speech, Mafizur Rahman, managing director of SME Foundation, said that the SME Foundation has already been able to disburse Tk100 crore allocated under the government's incentive package to recover the loss of the sector.
Industries Minister Nurul Majid Mahmud Humayun said the SME Foundation is providing all kinds of support to MSME entrepreneurs in the country. SME Foundation is working to produce products, create market connections and develop the skills of small and medium entrepreneurs across the country.
State Minister for Industries Kamal Ahmed Majumder said that at present the contribution of SME sector to the economy of Bangladesh is 25%. The SME policy 2019 aims to increase the contribution of the SME sector to 32% by 2024.
State Minister for ICT Division Zunaid Ahmed Palak said that inspired by the words of Prime Minister Sheikh Hasina, the youth of the country are not looking for jobs now, they are making arrangements to give jobs themselves.
He added that the country's small and medium industries are working as the driving force of Bangladesh's economy.
FBCCI President Mohammad Jasim Uddin said that SME entrepreneurs have been deprived of government incentives due to lack of good relations with banks. Therefore, alternative financing needs to be provided for this industry.
Van Berkel Rene, UNIDO's regional representative for South Asia, promised to work closely with the SME Foundation in the future.
SME Foundation Chairperson Masudur Rahman said that the Foundation is working to implement the directives of Prime Minister Sheikh Hasina to develop the skills of SME entrepreneurs, finance and create market connectivity.
Source: https://www.dhakatribune.com/business/economy/2021/06/27/access-to-banks-consistent-flow-of-funds-key-to-boost-smes