Potential of Small and Medium Enterprises

SMALL and medium enterprises (SMEs) are treated as the engines of growth and drivers of innovation worldwide. They play a significant role in driving economic growth and generating jobs.

In Bangladesh, the sector is actually changing the face of the economy. SMEs are playing a vital role for the country’s accelerated industrialisation and economic growth, employment generation and reducing poverty.

SMEs now occupy an important position in the national economy. They account for about 45 percent of manufacturing value addition, about 80 percent of industrial employment, about 90 percent of total industrial units and about 25 percent of the labour force. Their total contribution to export earnings varies from 75 percent to 80 percent.The industrial sector makes up 31 percent of the country’s gross domestic product (GDP), most of which is coming from SMEs.

The total number of SMEs in Bangladesh is estimated to be 79,754 establishments. Of them, 93.6 percent are small and 6.4 percent are medium. The 2003 Private Sector Survey estimated that there are about 6 million micro, small and medium enterprises, with fewer than 100 employees. About 60 to 65 percent of all SMEs are located outside the metropolitan areas of Dhaka and Chittagong.

The country’s SME sector has created 15 lakh jobs between 2009 and June 2014. Now, private and foreign banks disburse half of all farm loans and a third of these are going to SMEs.

Potential of SMEs

Every year about 2 million young people join the country’s workforce. Half of them find jobs at home or abroad. So, it has become a challenge to create more jobs so that the rest can be employed. SMEs can be an answer to the problem.

The target of achieving double-digit growth hinges largely on the performance of the small and medium enterprises.  In a labour surplus country like Bangladesh, SMEs can play a substantial role in providing the impetus to the development of the modern manufacturing sector and the job creation outside the agriculture and informal sectors.

In Bangladesh, people exhibit lesser ability in processing capital and machinery. SMEs are labour intensive but relatively low capital intensive. For a developing country like Bangladesh, SMEs are a cost effective way towards the reduction of unemployment. Since Bangladesh has not yet displayedadequate performance in large-scale industries that are predominantly owned and operated by public bodies, the country can solve its unemployment situation by encouraging SMEs. Seasonal and disguised unemployment can also be solved to a substantial extent by SMEs.

SME can reduce the urban migration in the capital and other major cities, increase cash flow in rural areas, and thereby enhance the standard of living of the rural people. SMEs are widely distributed all over the country which means developing SMEs will play a major role in bridging the urban-rural income gap and contribute towards inclusive growth. In a way, inclusive growth can only be achieved through a vibrant SME sector in a country like Bangladesh.

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