Limited access to finance has emerged as a significant challenge for small and medium enterprises (SMEs) in Bangladesh over the past decade, with banks primarily favoring larger, well-established companies, according to a draft White Paper on the State of Bangladesh’s Economy. The report was submitted to Chief Adviser Muhammad Yunus by a 12-member committee headed by economist Debapriya Bhattacharya.
The white paper highlights that SMEs struggle to operate effectively within a complex regulatory framework characterised by cumbersome licensing procedures, inconsistent rule application, and a lack of supportive Government agencies. This environment poses substantial barriers to scaling up for smaller businesses, particularly in key sectors like ready-made garments (RMG), which play a crucial role in the country’s economy.
Md Ali Zaman, president of the Small and Medium Enterprises Owners Association of Bangladesh, criticised the existing financial landscape, stating that only well-off groups benefit from business financing. He pointed out that even Government financing initiatives have not reached the intended small enterprises. During the COVID-19 pandemic, the previous Government allocated incentives for SMEs affected by the crisis, but only 27 per cent of these funds were disbursed, with a significant portion going to small-scale companies owned by larger businesses.
In April 2020, the Bangladesh Bank announced an incentive package worth Taka 20,000 crore to support SMEs impacted by the pandemic. However, the distribution of these funds has raised concerns about equitable access.
A recent study by the SME Foundation revealed that 57 per cent of SME entrepreneurs cited the tax structure as a major obstacle to compliance, while 54 per cent highlighted the trade license renewal process as a challenge.
The white paper also pointed out that SMEs are disproportionately affected by infrastructural deficiencies, including unreliable power supply, poor transportation networks, and limited access to modern logistics and communication systems. These issues contribute to higher operational costs and restrict expansion capabilities.
To foster a more inclusive business environment and enhance the contribution of SMEs to economic growth, the white paper calls on policymakers to address the specific needs of SMEs, particularly in terms of access to finance, infrastructure improvements, and the simplification of regulatory processes.
