1

Introduction

Generally, Small and Medium Enterprises means the business which is not big in the eyes of the policy
makers. Small and Medium Enterprises has been defined differently by the different countries of the
world. Generally, Small and Medium Enterprises is one that is independently owned and operated and not
dominant in its field of operations. It covers the activities almost all areas of business such as,
manufacturing, mining, wholesaling, retailing, service, and the like.
The role of Small and Medium Enterprises is indispensable for overall economic development of a
developing country country like Bangladesh. Since this sector is labor intensive with short gestation
period, it is capable of increasing national income as well as rapid employment generation by achieving
Millennium Development Goals (MDGs) especially eradication of extreme poverty and hunger, gender
equality and women empowerment. SME sector has played a vital role in economic development of some
prosperous countries of Asia. Our neighboring countries have also given due importance on SME. They
termed SME as employment generating machine and stressed on SME development for higher
economic growth, narrowing the gap of income inequality and reducing poverty. The government has also
put much emphasis on the development of SME sector considering it as the driving force for
industrialization.
Economic, as well as technical and social arguments warrant the promotion of SMEs, as they create large
scale, low-cost employment opportunities, use locally available inputs and technologies, mobilize small
and scattered private savings, develop entrepreneurship, and correct the regional imbalance in
development that exists in developing countries. Despite all these potentials, SMEs are disappearing,
abandoning the potential role they could have played in economic development. Several studies have
identified the major obstacles that include, but not limited to, financing, infrastructure facilities, taxes and
regulations, stability in policies, lack of electricity, lack of favorable regulatory environment to grow at
higher rates and lack of efficient labor for reaching the full potential of any country.

Literature Review

Small and Medium sized Enterprises (SMEs) have drawn a lot of interest among policy makers,
academics, businessmen and people in general. There is a broad consensus that a vibrant SME sector is
one of the principal driving forces in the development of the economy of Bangladesh. SMEs stimulate
private ownership and entrepreneurial skills and can adapt quickly to changing market situation, generate
employment, help diversify economic activities, and make a significant contribution to exports and trade.
Therefore, policies and initiatives to develop SMEs and to increase their competitiveness are a priority for
Bangladesh. Liberalization of the economy along with rapid globalization has posed severe challenges to
SMEs not only in international market but also in the domestic economy. Many studies have emphasized
the growth and development of the SME sector in Bangladesh and the forces responsible for it. According
to some studies, SMEs contribute between 40 60 per cent of the total output or value - added to many
South Asian developing economies, and also account for over 70 percent of total employment (Fan et al
2005; Nepal et al.2004).
Since SMEs are based on relatively small investment, their survival depends on readily available market
with easy access. In this context, access to finance, market development and expansion as well as removal
of other bottlenecks are a challenging task, which requires coordinated efforts by individual business
enterprises and the government. Bhattacharya and Hossain (2006) reported that the complex
documentation processes, lengthy releasing and clearing goods from ports, corruption in the customs
department, lack of automated customs procedures act as major problems obstructing the growth of any
business in Bangladesh, let alone SMEs. Lester and Terry (2008) commented that as SMEs started

becoming involved in export activities, these barriers became less severe, and the business environment
and internal capabilities emerged as stronger barriers. It has become key factors to overcome these
barriers for the development of the SMS sector in Bangladesh, and the trade facilitation has become
prominent. It is in this context that Prasad (2006) mentioned that trade facilitation initiatives had
significant positive impacts on the private sector by increasing the volume of exports and imports, as
well as through helping exporters find new markets.
According to a global survey of by OECD-APEC (Asia-Pacific Economic Cooperation) on Removing
Barriers to SME Access to International Markets there is range of barriers which are detrimental to
access by SMEs to international markets. Lester and Terry (2008) summarized four barriers as the most
serious impediments to SMEs access to international markets Based on the survey results, which are: (a)
a shortage of working capital for financing exports; (b) identifying foreign business opportunities; (c)
limited information related to locating/analyzing markets; and (d) inability to contact potential overseas
customers. These findings complement those of Duval (2007) which suggested that the focus of the
multilateral trade facilitation agenda would ultimately need to be broadened to address the need of
developing countries in Asia and the Pacific.
Schware and Kimberley (1995) focused on worldwide experience and identification of factors that make
way for trade facilitation through the successful application of IT. The study found that accessible
information and communication technology (ICT) could significantly improve trade performance, which
must be accompanied by simplification of documentation, reengineering of procedures, appropriate
training and availability of local expertise, and a reliable and cost-effective communications
infrastructure. Similar recommendations have been made by Duval (2006) and ESCAP (2006) while
emphasizing the establishment of an IT-based single window system and a modern risk management
system for ensuring higher gains from trade facilitation.
In a study on SME development of Malaysia, Muhammad et al. (2010) found that economic downturns
mostly affected small SMEs with few working capital, skilled workforce, etc., especially those involved
with trading and supplying products or services to other businesses. The major challenges faced by the
SMEs during the bearish period thus became lower cash flows and limited financing. Ahmed, Rahman &
Haque (2011) attempted to identify the constraints of development of manufacture based SMEs in
Bangladesh. According to their study, lack of infrastructural support, political unrest, shortage as well as
price hike of raw materials, high financing cost and inadequate utility facility are some of the key factors
for the slow development of manufacture based SMEs. Chowdhury et al. (2013) surveyed 100 SME
consumers and attempted to identify problems of SMEs in Bangladesh and potential solutions to that. The
problems identified by them were long waiting period for getting initial finance from banks because of
tedious paper works, inability to provide collateral to get loans, inexperience in preparing sound financial
systems for getting loans. As remedies the respondents advised financial incentives for sound business
plan and public-private partnership in providing effective training.

Objectives of the study

The present study focuses on the current scenario of SMEs and problems faced by them in Bangladesh as
well as suggest some policy recommendations. The specific objectives of the study are to:
i) Examine the role of SMEs in the economy of Bangladesh;
ii) Analyze the current status of SMEs in Bangladesh;
iii) Review the situation regarding their access to finance by SMEs;
iv) Identify the major constraints to SMEs development in Bangladesh; and
v) Put forward some specific recommendations for future growth of SMEs in Bangladesh.

Methodology of the Study

The study is mainly based on secondary data. Data have been collected from different published materials
like the publications of Journal of SME Foundation, Ministry of Finance, and relevant writings of some
scholars. The collected data have been processed manually and paper in the present form has been
prepared in order to make the study more informative, analytical and useful for the users.

Clarification of Conceptual Issues

5.1 Entrepreneur
Entrepreneur is one who creates a new business in the face of risk and uncertainty for the purpose of
achieving profit and growth by identifying significant opportunities and assembling the necessary
resources to capitalize on them.
Joshep Schumpeter (1934) identified entrepreneurs a century ago as innovators, bringing new goods and
technologies to markets, opening up new markets, processes and ideas, and commercializing new
knowledge in the context of the developed western nations.
An entrepreneur is an individual who, rather than working as an employee, runs a small business and
assumes all the risks and rewards of a given business venture, idea, or good or service offered for sale.
The entrepreneur is commonly seen as a business leader and innovator of new ideas and business
processes.
Entrepreneurs play a key role in any economy. These are the people who have the skills and initiative
necessary to take good new ideas to market and to make the right decisions that lead to profitability. The
reward for taking the risk is the potential economic profits the entrepreneur could earn.

5.2 Women entrepreneur

Women entrepreneur may be defined as a woman or group of women who initiate, organize, and run a
business enterprise. Kamal Singh who is a woman entrepreneur from Rajasthan, has defined woman
entrepreneur as a confident, innovative and creative woman capable of achieving self-economic
independence individually or in collaboration, generates employment opportunities for others through
initiating, establishing and running the enterprise by keeping pace with her personal, family and social
life.
Women entrepreneurship is based on women participation in equity and employment of a business
enterprise. Ruhani j. alic

Women who innovate initiate or adopt business actively are called women entrepreneurs. J. Schumpeter
According to the National Industrial Policy 2010 A woman will be termed as a Woman Entrepreneur if
she is the `owner or proprietor of a private or proprietary enterprise or `is the director of a private
company registered with the `joint stock or `shareholding enterprise or owning at least 51% share
among the shareholders.
The Bangladesh Bank (BB) deems a women as an entrepreneur if she is an owner or proprietor of a
privately run business organization or owns at least 51 percent of share in case of a joint venture or
company listed with the office of the Registrar of Joint Stock Companies and Firms.

16-08-2016 http://www.investopedia.com/terms/e/entrepreneur.asp