In Bangladesh, the SMEs account for around 20 per cent of the GDP, 80 per cent of the total industrial employment and around 25 per cent of the labour force. However, the COVID-19 pandemic has rattled the SME sector, considered the backbone of the country’s economy and justifiably so even as experts and industry leaders have been calling out to help this sector survive and sustain, so as to help the economy revive.
Not so long ago the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) President Md Jashim Uddin called upon the Government to implement speedily the stimulus package meant for the CMSMEs for ensuring desired economic recovery amid the pandemic even as he demanded increasing the timeframe of term loan for the SME sector.
The apex trade body chief raised the demands while speaking at a view-exchange meeting with the Chief Executives of the banks in an event titled, Ensuring Overall Economic Development under the Existing Situation: Problem and Potentials, organised by FBCCI.
Meanwhile, in a separate development, Industries Minister Nurul Majid Mahmud Humayun underscored the need for developing skills of Micro, Small and Medium Enterprise (MSME) entrepreneurs to develop the country.
“The SME Foundation is providing all kinds of support to SME entrepreneurs in the country. Under the direction of the Ministry of Industries, the SME Foundation is working to produce products, create market connections and develop the skills of small and medium entrepreneurs across the country,” he said at a recent event while also adding that even in Coronavirus, small entrepreneurs are setting up small businesses in remote villages of the country and now, they need to develop their skills while also expressing hopes that the development activities of the SME Foundation would further strengthen the efforts to create skilled entrepreneurs in the country.
Industries Minister further laid emphasis on allocating funds to the SME Foundation on a regular basis every year.
It’s not that the Government has not allocated any fund or stimulus package for the SME sector. However, many have raised question as to the volume of allocation vis-à-vis the other countries in Asia.
According to reports, the Government’s allocation for helping small and medium enterprises overcome pandemic-induced losses has been lesser when compared to the funds set aside for the same purpose in countries like India, Thailand and Malaysia.
As per the findings of the study, The Future of SMEs after the Coronavirus Crisis: Challenges and Opportunities, India allocated 38 per cent of its total COVID-19 stimulus funds for the SME sector while it was 33 per cent in Thailand and 24 per cent in Malaysia even as on the other hand, Bangladesh’s allocation is just 22 per cent.
Considering the existing situation, experts suggested the Government to increase the incentives for SMEs and pay special attention to the sector even as former Governor of the Bangladesh Bank, Atiur Rahman underlined, “The revenue of the local SME sector has fallen by 66 per cent due to the ongoing Coronavirus crisis as 76 per cent of their products remain unsold,” even as he went on to add that besides, 42 per cent of those employed by SMEs were receiving partial payments while 4 per cent have not been paid at all.
In the given backdrop, the former central bank Governor suggested that at least Taka 20,000 crore more should be allocated to help SMEs recover from the pandemic’s fallouts while some experts even suggested some more steps in this regard, including the implementation of SME Policy 2019, cluster-based SME development, credit disbursement process verification initiatives, creation of digital dashboards, development of bank-customer relations, giving priority to export-oriented SMEs, women-entrepreneurs and eco-friendly SME institutions.
SMEs are the driving force of Bangladesh’s economy and since the sector has been severely affected by the pandemic, the Government is already working with them to help overcome the losses, claimed Secretary to the Ministry of Industries, Zakia Sultana even as the Chairperson of the SME Foundation, Md Masudur Rahman said the capacity of the SME Foundation needs to be increased to spur the sector’s development while structural and policy reforms need to be carried out at the same time.
Meanwhile, FBCCI President underlined that although the implementation of the stimulus packages in the export and large-scale industries sectors was satisfactory, the implementation rate of stimulus package in the CMSMEs is 77 per cent and, under the circumstances, he called upon the Government to speedily disburse the fund from the stimulus packages to keep the businesses of cottage, micro and medium entrepreneurs operational while at the same time, he also suggested for providing support to the unintentional loan defaulters side by side taking action against the intentional loan defaulters.
For the flourishing of the SME sector, the FBCCI President further suggested increasing the timeframe for term loan to 15 years from 10 years having a grace period of two years side by side providing bank loans to the SME entrepreneurs not having bank accounts with the recommendations from the concerned trade bodies while in this regard, he also called upon the banks to follow the master circular of the Bangladesh Bank on CMSME financing.
The FBCCI Chief also suggested increasing the rate of down payment to 2 per cent from 1 per cent for loan rescheduling to simplify the industrialisation process while in order to further reduce the cost of doing business, he proposed reducing the corporate tax rate of banks further, insurance companies and financial institutions to 35 per cent from 37.5 per cent.
Meanwhile, citing findings of the study, Md Masudur Rahman pointed out a number of major challenges for the growth of local SMEs, which also includes the fact that less than one-third of the sector’s workforce are women, half of the enterprises are located around just two cities, lack of pre-determined access to Government procurement for SMEs as well as formal financing due to high lending rates and strict requirements even as the SME Foundation recently signed a memorandum of understanding (MoU) with Dhaka Stock Exchange (DSE) to help small and medium enterprises (SMEs) raise up to Taka 30 crore in funds from the capital market for expanding their businesses.
“This opportunity will undoubtedly usher in a new era for the SME sector,” said Md Masudur Rahman, while Tarique Amin Bhuiyan, Managing Director of the DSE and Md Masudur Rahman, signed the agreement on behalf of their respective organisations.
However, simply signing the MoU is not enough as it now needs to be successfully implemented, Tarique Amin Bhuiyan said, adding, “At present, there is an opportunity to raise capital ranging from Taka 5 crore to Taka 30 crore but the change in definition of SMEs will further increase the amount,” while Rahman on his part underlined the SME sector in India accounts for 60 per cent of the country’s economy while it was about 70 per cent in both China and Japan but only 25 per cent in Bangladesh.
Meanwhile, DSE Chairman Eunusur Rahman said the Government announced a two-phase stimulus package for the SMEs amidst the ongoing Coronavirus pandemic but most of them were unable to get the benefit due to various complications.
“But this is a great opportunity for the SMEs to raise funds from the stock market because the market is the most reliable place to raise long-term capital,” he added.
Given the role and importance of the SME sector in ensuring the overall well-being and revival of Bangladesh’s economy while also keeping in mind the allocations that its peer countries have made in terms of Covid stimulus, Bangladesh would do well to increase the same while also make loans easily available to the SME entrepreneurs to help revive the SME sector and consequently the economy of the country too!