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The views expressed in this presentation are the views of the author and do not necessarily reflect the

views or policies of the Asian


Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent.
ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their
use. Terminology used may not necessarily be consistent with ADB official terms.

Welcome

to
Presentation on

Bangladeshs SMEs
Md. Zahir Ahmed

Deputy Secretary
Ministry of Industries
Bangladesh

National Flag of Bangladesh

Map of Bangladesh

Parliament Building

Coxs Bazar, The longest sea beach of the world

National Animal

National Emblem and Logo

National Emblem

National Logo

Bangladesh At a Glance
Official Name
Government

The People's Republic of Bangladesh


Parliamentary form of government, headed by the Prime Minister

Area

147,570 square km-mostly alluvial fertile plain.

Location
Boundary

Between 200 34' and 260 38' north latitude and between 880 01'
and 920 41' east longitude.

Standard Time
Population/Literacy
Population Growth Rate
Poverty Rate
Total Labor Force
Inflation Rate
Unemployment Rate
Poverty Rate

GMT+6 hours
160.7 million /62.30%
1.37
24.80%
6.10 Crore
6.41%
4.3%
24.80%

North: India; West: India; South: Bay of Bengal; East: India and Myanmar

Exchange rate (Taka/US$) 77.67


The Doing Business, 2015
by World Bank
Sovereign ratings of
Bangladesh

43rd (in terms of protecting investors)


Ba3(Moodys), and BB-(Standard and Poors)

Economic Data
Item
GDP Growth
Rate

2011-12 2012-13 2013-14 2014-15 2015-16


6.52%
6.01%
6.06%
6.55%
7.11%

Per Capita GDP


(US$)

880

976

1110

1236

1384

Inflation Rate

6.66%
10.36

6.78%
15.31

7.35%
21.50

6.41%
25.02

5.61%
31.10

Foreign Reserve
(Billion US$)

Source: Bangladesh Economic Review, BBS, and Bangladesh Bank.

Sector wise GDP Contribution:

Major Export Items


Sl
1
2
3
4
5
6
7
8
9
10

Major Items
Readymade garments
Fish, shrimps and prawns
Jute manufactures
Leather and leather manufactures
Raw jute
Tea
Furnace oil,naphtha and bitumin
Fertilizer
Handicraft
Others

Source: Bangladesh Bank Export Receipt.

% of Total Export

78.40
3.10
3.40
2.80
1.20
0.01
0.60
0.10
0.01
10.40

Major Import
Items
Major Import Items
Sl

Major Items

% of total import

POL (petrolium oil and lubricants)

11.74

Textile and articles

9.05

Iron, steel and other base metals

6.66

Raw cotton

6.24

Edible oil

4.92

Fertilizer

4.13

Plastics and rubber articles

4.09

Chemical

3.62

Yarn

4.14

10

Food Grains

2.7

Source: Bangladesh Bank.

SME Contribution to Employment

Type of Enterprises

Number of Enterprises

No of Employment

Total Enterprises

78,68,565 (100%)

24500850 (100%)

Cottage Industries

68,42,884 (87.52%)

13168327 (53.75% )

Micro Enterprises

1,04,007 (1.33%)

558870 (2.28%)

Small Enterprises

8,59,318 (10.99%)

6600685 (26.94%)

Medium Enterprises

7,106 (0.09%)

706112 (2.88%)

Large Enterprises

5,250 (0.07%)

3466856 (14.15%)

SME Strategy
Implementation of poverty alleviation programs and
strategies is a systematic and continuous effort in
Bangladesh. Rapid and sustainable growth of SMEs is the
undoubtedly one vehicle for accelerating economic growth
to the point of having a measurable impact in the way of
reduction of poverty and unemployment, generation of
more employment.

SME Definition
Category
Manufacturing
Service
Source: Industrial Policy 2016

Small

Medium

Indicators

75 Lac - 15 Crore

15 Crore - 50 Crore

Replacement cost

31-120

121 - 300

No. of workers

10 Lac - 2 Crore

2 Crore - 30 Crore

Replacement cost

16 -50

51 - 120

No. of workers

SMEs in Bangladesh comprises of cottage, micro, small and medium


enterprises
There are about 7.81 millions SMEs are in Bangladesh and about 50% SMEs
are located outside two biggest metropolitan cities of Bangladesh, namely
Dhaka and Chittagong.
Of the total share of manufacturing value added to GDP, SMEs contribution is
estimated at 28-30%
It contribute 23% of total civilian employment in Bangladesh.
It provide job opportunities to about 70%80% of the nonagricultural labor
force.
SMEs employment are about 80% of total industrial labor force.
SMEs are struggling with many problems in their way to growth. Access to
finance is one of the great problems for SME development.
SMEs are taking finances both formally and informally
SME is accelerating financial inclusion which in turn helping to achieve the
targeted growth of the economy

High Priority Sectors for Supporting


SMEs Integration

1.
2.
3.
4.
5.
6.
7.

Agriculture and agro processing sector


Readymade garments
ICT
Pharmaceuticals
Leather and leather goods
Light Engineering
Jute and Jute good

Source: National Industrial Policy-2016


2

POLICY REFORM FOR PROMOTING SMEs

Bringing uniformity in SME definition


Easing access to SME Financing
Issuance of Guidelines for financing SME
Sector
Women Entrepreneurship Development
Establishment of SME Foundation
Supporting Bangladesh Small & Cottage
Industries Corporation (BSCIC)

EXISTING POLICIES FOR


PROMOTING SMEs
The National Industrial Policy-2016;
National SME Policy Strategies
2005;
Seventh Five year Plan;
Vision-2021.

SME PROMOTION AGENCIES


IN BANGLADESH
SME Foundation
Bangladesh Small & Cottage Industries
Corporation (BSCIC)

SME Policy Authorities


For Overall SME Policies
SME Cell, Ministry of Industries

For Financial Policies


Bangladesh Bank (Central Bank of Bangladesh)

SME Support Agencies


Bangladesh Industrial Technical Assistance Center (BITAC):
National Association of Small and Cottage Industries in Bangladesh
(NASCIB)
Bangladesh Council of Scientific and Industrial Research (BCSIR)
Business Promotion Council (BPC)
National Productivity Organization (NPO)
Export Promotion Bureau (EPB)
Bangladesh Handloom Board (BHB)
The Jute Diversification Promotion Centre (JDPC)
Various Business Chambers and Business Associations.

SME Policy Implementation Chain


National Taskforce For
SME Development
(Draft SME Policy)

Ministry of Industries

Formulate the SME Policy

Bangladesh Bank (Central Bank)

Formulate the SME Loan Policy and Programs


and provide refinance to the FIs
SME Foundation
Implement SME
Policy

Departments/Divisions/
Corporations

Financial Institutions
Provide credit facilities

Chamber of Commerce &


Industry (Help SMEF)

SMEs

Financial Support Policies for SMEs


To provide easy financial support and to ensure easy access to
finance for SMEs Bangladesh Bank maintains various
refinancing schemes to provide financial assistance to
commercial banks. Under these schemes commercial banks
provide loans to SMEs at their own risk at competitive interest
rate for mutually agreed period. Later on Bangladesh Bank
against the claim of disbursing bank, reimburse the same
amount to the bank at bank rate (5%) for a period of five
years. Funds of all schemes are recycling in nature.

CURRENT CONDITIONS

The lower limit of SME credit for refinancing facilities is reduced to Tk.50,000.
Financing to cluster based industries has been enhanced. Each bank and NBFIs
have been instructed to take overall responsibility for at least one cluster
development. At the same time one bank in each district has been asked to play
lead role in this regard.
Financing to agriculture based industries has been enhanced and expanded.
Banks and NBFIs are advised to consider reasonable grace period on SME sector
while formulating their SME credit policies.
SME monitoring cells have been formed in each branch of Bangladesh Bank
including the SME and Special Program Division. Each Bank and NBFIs also have
SME monitoring cell in operation.
All persons with disabilities including visually impaired persons and persons
involved in creative writing, publication and marketing with entrepreneurship are
offered opportunities for low interest rate (bank rate +5 percent) financing from
the Bangladesh
Bank Fund under the small enterprise sector of the SME and Special Program
Division of Bangladesh Bank.
Along with small and medium entrepreneur, the micro entrepreneurs also have
been provided opportunities for medium and long term credit facilities from JICA
supported two tier funds under FSPDSME project.

CURRENT CONDITIONS

(CONTD.)

Allocating 15 percent of Bangladesh Bank refinance fund for women entrepreneurs.


Instructions were given to Banks and NBFIs to charge reduced interest rate of 10 percent
(Bank rate + 5 percent) to women entrepreneurs on refinance schemes.
Ensuring the opening of a separate Women Entrepreneurs Dedicated Desk/SME Help
Desk in both Head Office and Branches of all Banks and NBFIs.
In case of women industrial entrepreneurs or the credit seeking organizations having 51
Percent share owned by women entrepreneurs the Banks/NBFIs can sanction loan of
Tk.2.5 million to women entrepreneurs without
collateral against personal guarantee from the refinancing fund.
Instigating a policy of group based lending up to Tk.50,000 or above to the women
entrepreneurs of Cottage and Micro Enterprises.
A programme has been undertaken in the name of Skill for Employment Investment
Programme by the Government with the financial support of ADB.
At the first phase of this program 2,30,000 persons will be provided market based
training in next three years.
Among them the SME and Special Programes
division of Bangladesh Bank will arrange job oriented training for 10,200. It is expected
that most of the trainee under Bangladesh Bank will be self-employed after receiving the
training.

KEY CHALLENGES FOR THE SMEs IN


BANGLADESH
Resource scarcity;
High employee turnover;
Absence of eco friendly modern technology;
Poor physical infrastructure;
Lack of information;
Limited Access to Finance;
Lack of entrepreneurship skills;
Lack of skilled manpower;
Lack of raw materials;
Access to Market and lack of awareness regarding the importance of marketing
tool;
Lack of research and development facilities;
Fierce competition with the cheaper foreign goods;
Absence of international standards testing laboratories;
Lack of technology incubation center;
Lack of competitiveness among the SMEs.
Mindset

Thank You