How we view SMEs needs to change
The Dhaka Chamber of Commerce and Industry (DCCI), said to be the top trade body representing small and medium enterprises (SME) in the country, has been working tirelessly for the development of the sector for more than six decades. DCCI President Rizwan Rahman talked to reporter Abbas Uddin Noyon of The Business Standard, about SME Day.
SMEs are called the lifeblood of the economy in almost all countries of the world. What is the contribution of the SME sector in the economy of Bangladesh and what is its current status?
SMEs have played a major role in the industrial structure of many developed and developing countries in Asia and other parts of the world. China employs 40% of its total workforce in the SME sector that contributes 60% to the country's industrial sector. Similarly, the contribution of SMEs to India's industrial sector is 40% and 10.6 crore of their total workforce is employed in this sector. Despite being a neighbouring country, Bangladesh is lagging behind in this sector.
At present, the SME sector contributes 25% to the GDP of Bangladesh due to the valiant efforts of one crore SME entrepreneurs. Over four crore people are employed in this sector.
What is the impact of Covid-19 on SME entrepreneurs?
Small entrepreneurs are the main victims in Covid-19 and a massive number of them have dropped out of the industry. According to our research, DCCI has 4,200 small entrepreneurs with regular membership and 16,000 with passive memberships. Passive membership is for those who do not pay regular membership fees or refrain from participating in various activities of the organisation. A survey of the members shows that about half of the entrepreneurs have stopped production, profits have gone down for 90% of the companies, and a majority of them have incurred losses. Despite their significant contribution to the economy, they are having the most trouble getting the stimulus package announced by the government.
Who has received an incentive package worth Tk20,000 crore announced by the government for small entrepreneurs?
The Bangladesh Bank says 75% of the incentive package has been distributed but our survey reveals that only 12% of our members have received a loan. The rest could not even apply for a loan, mainly because of collateral and documentation requirements. Small and micro-entrepreneurs are not able to fulfil the conditions and medium industries have borrowed money.
That is why it is necessary to change the definition of SME and separate medium scale entrepreneurs from other SMEs. Small and micro-entrepreneurs need to be differentiated and allocations for them should be treated differently and separately.
Why did SMEs not get the government incentive loan properly?
Immediately after the first wave of the Covid-19, incentives were given to export sectors. Later, incentives have also been announced for small and medium businesses along with local industries. However, banks are less interested in providing loans to small entrepreneurs.
Each regional manager of banks has a loan disbursement target. To meet that goal, bankers focus more on disbursing large loans. The central bank should have made commercial banks responsible and accountable for disbursing loans to small businesses. Many small entrepreneurs are yet to be capable of availing loans with collateral. Most of them could not be brought into banking channels yet. Therefore, assistance cannot be reached to small entrepreneurs without providing unsecured loans.
Small businessmen did not get such help, even though the government had intended to help. What could be the solution?
According to the World Trade Organisation, small and medium entrepreneurs account for the employment of seven out of 10 people in the country but they are neglected and deprived.
Not just in business, but also in nature, the larger have an advantage and are more capable. Due to their survival capacity and efficient management, larger businesses can easily avail various facilities. Small businesses, on the other hand, lag in competition due to poor management and financial constraints.
If you want to help small entrepreneurs, you need to change your attitude. Incentives need to be distributed according to the contribution of a sector. If Tk100 is available as incentive, SMEs should get Tk80 because the contribution of SMEs to the economy is about 82%.
