Chapter 01
Overview of SME
Rowshonara Akter Akhi
Lecturer
Jahangirnagar University
Introduction
• Bangladesh is considered as one of the Next 11 (N-11), and
Frontier Five countries respectively by the Goldman Sachs and
JP Morgan.
• Bangladesh economy is growing up to 7-8% GDP growth during
last one decade and last year in 2019-20 the growth rate was
8.13% (CPD and National Budget Speech 2020).
• Bangladesh is blessed with fertile plain land, enormous
supplies of irrigation water from rivers and a large basket of
agriculture products.
• Agriculture recorded sustained growth for the last three
consecutive fiscal years responding to favorable weather
conditions, continued government support for agriculture
inputs and greater access to credit.
Cont’d
• As per Vision 2021 the contribution of industry and service
sector to GDP will stand at 40 and 45 respectively in place of
28 and 50 percent as at present.
• Major export earning sectors are the Readymade garments,
knitwear, frozen food and shrimp, tea, raw jute, jute products,
leather and leather products, chemical fertilizer, ceramic
tableware, naphtha, furniture, fruits and vegetables
,handicraft, light engineering products including bicycle etc.
SMEs: Bangladesh Perspective
• The National Industrial Policy 2010 has clearly defined the
small and medium enterprises (SMEs) with two major
indicators e.g. replacement cost and no. of workers. Summary
of the definition is as follows:
Cont’d (According to Bangladesh Bank)
SMEs: International Perspective
• Currently small and medium sized enterprises are defined by
their size.
• In the European Union SMEs are defined in the Commission
Recommendation of May 6, 2003. Concerning to this
recommendation an enterprise is regarded as small or
medium sized if it has:
– not more than 250 employees
– not more than 50 Million Euro turnover
– not more than 25% of the shares of such an enterprise are in the
ownership of another enterprise.
Cont’d
Definition of SMEs in some selected countries
• 1. India:
• According to the Micro, Small and Medium Enterprises
Development Act 2006, enterprises engaged in manufacturing
were defined as:
• A micro enterprise, where the investment in plant and
machinery does not exceed twenty five lakh rupees ($50,000);
• A small enterprise, where the investment in plant and
machinery is more than twenty five lakh rupees but does not
exceed five crore rupees ($1 million); or
• A medium enterprise, where the investment in plant and
machinery is more than five crore rupees but does not exceed
ten crore rupees ($2 million).
Cont’d
• Enterprises engaged in services were defined as:
• A micro enterprise, where the investment in equipment does
not exceed ten lakh rupees ($20,000);
• A small enterprise, where the investment in equipment is
more than ten lakh rupees but does not exceed two crore
rupees ($40,000); or
• A medium enterprise, where the investment in equipment is
more than two crore rupees but does not exceed five crore
rupees ($1 million).
Cont’d
Cont’d
Cont’d
Cont’d
Govt. policy under “Industrial Policy 2010” for SME
• Government will encourage SME entrepreneurs through
providing adequate loan and training programs to create
strong position of SME.
• SME will be re-financed continuously by BB through three re-
financing funds.
• Women entreprenuers will get priority for SME loan . 15% of
total loan will be for them and the interest rate will be 10%.
• ICT Industries will get priority for govt. assistance.
Institutional Arrangements for SME development
• BSCIC has been the key public sector agency responsible for
supporting SME promotion for a long time.
• Bangladesh Bank,BASIC Bank,SME Foundation, Bangladesh
Krishi Bank, Janata Bank etc.
• The private sector efforts through participation of MIDAS and
selected NGOs (especially GB, BRAC and Proshika) have been
worked especially in SME promotion.
Government Organizations for SME development
• Bangladesh Small and Cottage Industries Corporation
(BSCIC)
• SME Foundation
• Bangladesh Bank
• BASIC Bank
• Bangladesh Krishi Bank
• Others (Janata Bank, Agrani Bank, Rupali Bank)
Bangladesh Small and Cottage Industries
Corporation ( BSCIC)
• BSCIC provides assistance in all other matters relating to
development and expansion of small and cottage industries (SCI).
Its major functions are as follows :
•Promotion and registration of small and cottage industries
•Conducting advisory and industrial promotion services including
training of entrepreneurs, skill development of artisans and
craftsmen, creation of jobs for SCIs etc.
•Construction and development of industrial estates with necessary
infrastructural facilities for SCIs.
•Development of linkages between SCIs and large and medium sized
industries.
Goals of BSCIC which are focusing on SME
development
• To assist private entrepreneurs for establishing new Small,
Medium & Cottage Industries (SMCIs) unit upto 2015.
i)Total : 0.409 million unit
ii) Small Industry : 0.086 million unit
iii) Medium : 0.008 million unit
iv) Cottage Industry : 0.315 million unit
Goals of BSCIC which are focusing on SME development
• To raise daily income of employed poor labour force people in
SMCIs sector from 1 US$ to 3 US$ through poverty alleviation
programs/projects undertaken by BSCIC and through private
sector investment.
• Cumulative Small, Medium & Cottage Industry unit and
employment will reach by 2025 (figure in million).
Category of Industry Unit Employment
Small 0.171 2.915
Medium 0.013 0.863
Cottage 0.904 2.852
Total 1.088 6.630
The stretegy of BSCIC for implementing proper
incentives and facilities for deveopment of SME
• Strategy 1: Upgrade technological and management
capabilities of SMEs.
• Strategy 2: Develop SME’s entrepreneurs and human
resources
• Strategy 3: Enhance SMCI’s access to markets
• Strategy 4: Strengthen financial support system for SMCI’s
• Strategy 5: Foster an environment conducive for business
development
• Strategy 6: Develop micro-enterprises and community
enterprises
• Strategy 7: Develop networking among SMCI’s and clusters
The BSCIC provides services to the private sector
entrepreneurs
Pre investment counseling
Industrial information dissemination
Scouting for entrepreneurs
Extension services
Entrepreneurship development
Project appraisal (technical, financial, economic and
management)
Feasibility study
Credit arrangement
Sanction of enterprises
Supervision of project implementation
Infrastructure development
Management and skill development
The BSCIC provides services to the private sector
entrepreneurs (Cont’d)
Product development
Design and prototype development and distribution
Raw material arrangement
Diagnostic studies
Sub-contracting arrangement
Innovative production process and technology
Quality control
Market survey of products
Marketing (including export) arrangement
Literature on products and process from home and abroad
Research and development
Inter-organization co-ordination.
Sme Foundation
• Non-Trading organization
• To develop SME for employment creation and national
economic growth
• To implement govt. SME policy
• Policy advocacy and research
• Credit wholesalling program (9% interest rate)
• Capacity building and skilled development
• Technology development and uses
• Access to information
• Women entrepreneur development
• Business support services
• Product quality development and quality certification
assistance
BASIC Bank limited and SME
• State owned and specialized bank
• 50% fund for SMEs financing
• Maximum loan for Small Enterprises 50 lac
• Prefer 25 SME sectors
• BASIC KALYANI for women entrepreneur
• Collateral free maximum loan 5 lac @ 10% interest rate
• Maximum loan payment period 3 to 5 years
Bangladesh Krishi Bank and SME
• Providing loan for SME to reduce proverty to implement vision
2021.
• Loan for women enterpreneur with simple conditions.
• Two types of loan (Project loan and Current capital or Cash Credit)
• Small Enterprise Loan limit
Service and trading 50 thousands to 50 lac
Manufacturing 50 thousands to 1 crore
• Medium enterprise Loan limit
Service and trading 50 lac to 10 crore
Manufacturing 1 crore to 15 crore
• Project loan interest rate 12% and payment period = grace period
+ 5 years.
• Current capital / Cash credit interest rate 12.5% and payment
period 1 year.
Bangladesh Bank and SME development
• Separate SME and special programs department
• Annual SME loan target for banks
• Priority for small and women entreprenuer
• Region and sector based financing
• Training
• Three layer monitoring system
• Available information for SME loan and promotion
• Outsourcing for SME loan program
Cont’d
• Motivation for SME loan providing
• Specific funds for women entrepreneur
• Help desk for women entrepreneur
• Low interest rate for women entrepreneur(Bank rate+5%)
• Collateral free loan upto 25 lacs for women entrepreneur
• SME loan for ICT sector
• Help for increasing grace period
Major constraints of SME around the globe
• Limited access to finance.
• Lack of appropriate technology.
• Limited of market access.
• Lack of adequate investments
• Fierce competition
• Scarcity of knowledge
• Inadequate infrastructural facilities
• Difficulty in finding and retaining human
resources
• Impact of WTO compliance and regulatory
systems
Assignment- 01
Contribution of SMEs in Bangladesh Economy
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