Page 66 - November 2020

MSMEs in
Bangladesh: Their
role and output
In Bangladesh, MSMEs form the
largest segment of the national
economy. 87% of the civilian
population is engaged with MSMEs.
These entities include a quarter of
Bangladesh’s Gross Domestic
Product (GDP). In terms of resource
generation and utilization, MSMEs
play a pivotal role. National
Industrial Policy of 2016 has
understandably given priority to
MSMEs. 2005 SME policy also
speaks likewise.
2013 National Economic Census
states there are 1,04,007 micro level,
8,59,318 small level and 7,106
medium level enterprises in
Bangladesh. These enterprises
employ about 5,58,870 people in the
micro, 66,00,685 with small and
7,06,112 with medium enterprises.
Overall, these enterprises are
responsible for about 8 million job
creations. It could be much higher, as
stats may have missed some facts.
Manufacturing accounts for 36.67
billion USD worth of export earnings
in Bangladesh economy. MSMEs
contribution in manufacturing is
about 40%. Contribution of MSMEs in
the service sector is also very
considerable. So overall MSME
contribution in GDP is way higher
M industries. In the 2018-2019
actually.
MSMEs are small scale compared to
industrial giants. So they totally
depend on locally available raw
materials. Thus these enterprises are
utilizing local resources for
production and service sectors.
Moreover, these enterprises are not
capital intensive. So income
generated by these is often saved for
reinvestment. It increases national
saving as well as the financial
security of the people involved.
Unlike heavy industries, which
require costly and often imported
machinery, MSMEs are mostly
labour-intensive. They do use
machinery too, but they are mostly
cheap and locally produced.
Readymade garment (RMG) and
leather (raw and processed) are the
two most significant export
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In Bangladesh, urbanization is
taking place at a rapid speed.
But the rural workforce is still
huge, MSMEs play a pivotal role
in rural employment. About 5.8
million MSMEs operate in rural
areas, whereas in urban areas,
there are 2.3 million. So, rural
development and the economy is
very much dependent on MSMEs.
However, these MSMEs are
essential in urban economies
too. Dhaka alone holds about
32.2% of the enterprises. 17.1%
is in Chittagong, 15.1 per cent in
Rajshahi, 13.5% in Rangpur,
Micro, small and 12.8% in Khulna, 4.8% in
medium Barishal and 4.5% in Sylhet.
enterprises COVID-19 impact
(MSMEs) can be a on Bangladeshi
way to fulfil that
MSME
goal. These COVID-19 has created a large
enterprises can scale negative impact on almost
ensure proper every sector possible. Export
earnings fell to 33.67 billion
utilization of our USD, a 16.93% decrease
population and an compared to the previous fiscal
increase in year. More than two-third
MSMEs were closed down or cut
employment, short their activities. These
wealth and austerity measures created
livelihood quality. unemployment and
impoverishment for millions of
employees. It’s yet not clear
commodities of Bangladesh. when economic activities will
measures being taken to fight it
begin to commerce on full flow.
Probably the pandemic and
MSMEs dominate both of these
will continue to create a negative
fiscal year, Bangladesh exported
impact upon our economy for
goods worth 40.53 billion USD.
many coming years.
So it won’t be wrong to say that
worth of export orders were
export industry.
MSMEs dominate Bangladesh’s Worldwide millions of dollars
cancelled, industrial demand
Most of Bangladesh’s
manufacturing and service lessened and so did the
sector industries are production of consumer goods.
concentrated in Dhaka and Lockdown measures around the
Chittagong. However, 51 districts world resulted in a sharp drop in
have cluster SMEs. If these consumer demands. A large
clusters could be developed, section of the workforce stood
economic activities will be more idle, stocked products and
decentralized, relieving pressure various equipment decayed and
on the big cities. Besides, degraded. At the same time,
MSMEs could be expanded into global supply chains were
large scale industries. In fact, disrupted on an unprecedented
most of the large enterprises scale.
were started as MSMEs. International Finance
Corporation (IFC), World Bank By mid-2020, the government has
(WB) and the UK’s Foreign, allocated Tk20,000 crore
Commonwealth and
low-interest funding for MSMEs.
Development Office (FCDO) has Bangladesh did launch One-Stop
conducted a joint survey on Service (OSS) and Single Window
MSMEs, and the results show Services to ease business conduct
a bleak picture. It was for exporters and importers. But
conducted between June and MSMEs seem in vital need of
August 2020. The survey funding which is not present.
encompassed eight divisions
and included 500 MSMEs in What to do
Bangladesh. The survey revealed a staggering
94% of MSMEs showed a clear communication gap on behalf of
drop in sales. 37% of the the government funding initiative.
workforce lost their jobs in a MSMEs need urgent cash inflow
temporary or permanent level, and subsidized loans to operate
and more than 70% were in a smoothly. The government is
vulnerable position. 83% of reported to have instructed banks
enterprises said they are facing to provide subsidized loans and
loss while conducting stimulus packages to these
business. Bangladeshi MSMEs enterprises. As the survey
were already in a vulnerable indicates, maximum MSMEs were
position, and the pandemic hit unaware of the government
them hard. The closing rate of incentives of providing stimulus
women-owned MSMEs is 37% funds. A more communicative
while 21% of the male-owned approach might help in resolving
MSMEs also stopped their this issue. Bangladesh is notorious
operation. for its bureaucratic red tape; some
important measure might be
Bangladeshi necessary in this regard.
MSMEs under Several reasons are there behind
MSMEs weakness, and these have
Corona: Less than Pulse Survey: Impact of been present beforehand. These
1% gets stimulus Covid-19 on MSMEs in issues are to be taken into
Bangladesh”, only 0.4 per cent considerations; otherwise
funding of MSMEs received financial channelling of stimulus funds
COVID-19 pandemic created a assistance from government won’t get the job done. Ease of
Working capital, machinery revealed. About 61% of MSMEs MSMEs suffer from crucial
cash strap situation for the
institutions. A staggering
government regulations and
communication gap was also
MSMEs in Bangladesh.
policies are urgent. In Bangladesh,
didn’t even hear about
and renting capabilities have
shortcomings regarding safety,
been exhausted. Many closed
government packages. About
environment, design, technology,
14% applied but didn’t receive
down and are in dire need of
successful usage of the internet,
was too difficult and
operating again. COVID-19
issues, alongside other
complicated to use for the
won’t last forever, already
cash incentives to start any support, while 10% said it waste management etc. These
geographical, social, economic and
many economic activities have funds. 5% of the surveyed political landscapes, need to be
commenced, and this is likely MSMEs failed to fulfil the taken into consideration to boost
to increase in the near future. qualification criteria, while the the MSME centric economic model.
So cash input, short or long rest 10% had other reasons. As many MSMEs gradually develop
lived, is a must for restarting It’s a grave situation for the into large scale industries, and
or boosting the MSMEs. dying MSMEs. About one-third current ones are pivotal for
Accordingly, the Bangladesh of them are finding it Bangladesh’s massive market and
government has channelled impossible to pay the loan in emerging economy, the government
stimulus funding for all types instalments, and about 43% must concentrate more in this
of business, but MSMEs have can do it regularly. It’s a sector. Increased funding and other
benefitted very little from peculiar fact that government steps will help the MSMEs to play
these incentives. According to incentives are not reaching their role in boosting the economy
the survey titled “Business these vital enterprises. after the COVID-19 pandemic.