SME sector in dire need of support

Increased policy support and smooth accesses to finance are needed on an emergency basis to help small and medium enterprises (SMEs) cope with the ongoing coronavirus pandemic, various experts suggest.

"A lack of access to formal financing has been identified as a major obstacle to the survival and expansion of SMEs in Bangladesh," said Atiur Rahman, a former governor of Bangladesh Bank.

Besides, many SMEs have suffered tremendous setbacks in terms of production, marketing and sales amid the Covid-19 crisis.

Rahman made these remarks while presenting a keynote paper at an international webinar styled "The Pandemic and SMEs: Shock-absorbing policy measures and future debates, impacts in Bangladesh and lessons from responses around the World".

The event, jointly organised by the Small and Medium Enterprise Foundation (SMEF) and Friedrich-Ebert-Stiftung (FES) Bangladesh, was held yesterday.

Shibli Rubayat Ul Islam, chairman of the Bangladesh Securities and Exchange Commission (BSEC), said SMEs account for 25 per cent of the country's GDP but only one-third of the total workforce engaged in the sector were females due to its lack of policy incentives for women.

Islam, who moderated the discussion, referred to the Bangladesh Bureau of Statistics when he went on to say that the country was currently home to about 7.8 million enterprises of all sizes, of which a staggering 6.8 million were cottage enterprises.

The second largest group were SMEs with over 8.66 lakh small and medium sized firms, making up just a little over 11 per cent of the total number of companies.

The SME sector generates 30 per cent of the total employment in the country as well. Small enterprises account for 27 per cent while medium enterprises add the remaining 3 per cent.

Almost 23,000 small enterprises and around 3,000 medium enterprises are involved in exports either directly or indirectly, Islam said.

Bangladesh Bank's positive attitude towards promoting the SME sector has been well reflected in the SME financing trend since the beginning of this decade, he added.

But while the country's SMEs have witnessed commendable growth over the past 10 years, new barriers to the sector's expansion have risen, said former central bank governor Rahman.

Industries Minister Nurul Majid Mahmud Humayun said during these difficult times, it was important to ensure that jobs stayed secure and businesses sustainable.

This includes protecting the livelihoods of workers who are most vulnerable to the adversities of the coronavirus fallout and those performing silently in the informal economy.

"The SMES are in serious trouble due to the Covid-19 crisis," Humayun added.

The industries minister also informed that the government has already taken some policy measures to help SMEs cope with the "new normal" and declared that it would provide some incentives to SME entrepreneurs as well.

This initiative will certainly widen up the opportunities to address the sufferings of SME entrepreneurs around the world and Bangladesh in particular, Islam said.

M Abu Eusuf, professor of economics at the University of Dhaka, said various SMEs suffered drops in both demand and supply due to the pandemic.

To address this issue, he suggested that the government implement policy changes that encourage SMEs to shift their operations online.

According to the professor of economics, start-ups in the SME sector should get easier access to finance while a special bank for SME and women entrepreneurs is required.

Arijit Chowdhury, the additional secretary to Financial Institutions Division (FID), said his organisation was at the final stages of preparing a strategy to resolve the access to finance issue for SMEs.

Besides, the sector will get focus in the national financial inclusion strategy which is being formulated.

The FID is trying to support the SME sector and take its development to the next level, he added.

Momtaz Uddin Ahmed, another professor of economics at the University of Dhaka, suggested that a survey on SMEs be immediately conducted to identify challenges to their businesses and find solutions.

As per the findings, necessary support could be provided to help the sector survive, he added.

Md Masudur Rahman, chairperson of the SME foundation, Md Safiqul Islam, managing director of SME Foundation, and Tina Blohm, resident representative of FES Bangladesh, were among others to speak at the webinar.