Like many university students, Md Shafat Kadir dreamt of becoming a mere employee at a company, but a workshop changed his dream and turned him into a successful small entrepreneur within a few years.

It also took him to the 11th National SME Product Fair-2024’s stage to receive the National SME Entrepreneur Award-2023 from Prime Minister Sheikh Hasina.

“When I was a final year student of the Department of International Business at Dhaka University, I took part in a two day-long workshop of Dhaka Chamber of Commerce and Industry (DCCI) in 2014. To get the certificate, I submitted a plan of manufacturing miniatures there. It was highly appreciated, which helped me to become an entrepreneur,” Founder and Chief Executive Officer (CEO) of Hat Bakso Md Shafat Kadir told the Daily Sun.

Shafat started his business with one employee, investing Tk4.5 lakh, and currently he has three partners and 65 employees in his company which produces 200 items priced between Tk300 and Tk5,000 and sell those online as gift items. Despite witnessing a considerable boom in his business, he feels that he – and many others like him – is missing out on huge opportunities available at the global market due to the lack of an environment conducive to small enterprises.

“We have a huge scope of exporting our SME products, but we need proper support and guidelines. We can earn billions of dollars to export our items as low cost labour and raw materials are available here,” he said.

According to Business Research Insights, the global gifts retailing market size was $65.000 billion in 2021 and it is projected to touch $ 94.044 billion in 2031.

Shafat said the gift item market size is around Tk5,000-6,000 crore in Bangladesh. Now they need financial support to participate in International fairs to enhance SME product export. SME foundation can connect small and medium enterprises (SMEs) with international buyers.

However, data about the volume of SME products exported by the country is not available anywhere.

Another entrepreneur, Rezbin Hafiz, owner of Peoples Footwear and Leather Goods, said she received the National SME Award-2020 under the Micro-entrepreneur Category from the prime minister.

“Leaving the teaching profession, I started a footwear business with three workers in 2014, investing Tk3.5 lakh. Now, 250 employees are working in my two projects located at BSCIC industrial cities in Gaibandha and Dhamrai,” she told the Daily Sun.

“I have been exporting leather goods to Malaysia, Japan, China, India and Italy since 2019. I took part in eight international fairs in India and China.  There is huge potential for exporting SME leather goods to the international markets. I am trying to expand my business here,” she added.

The woman entrepreneur claimed that there are many complexities including lack of suitable documentation and quality accessories demanded by global buyers to export the leather goods.

Improving SMEs’ export capabilities essential for overcoming post-LDC challenges

Experts said Bangladesh must strengthen the SME sector’s capabilities to ensure a sustainable economy and overcome the challenges after graduating from the Least Developed Country (LDC) status in 2026. So, technology advancement, access to finance, marketing facility, research and innovation, product diversification, cluster base, and infrastructure issues should be emphasised for the overall development of this sector.

Former DCCI president Md Sameer Sattar said, “The sector will shape the future of smart Bangladesh in 2040, if we can prepare our CMSMEs (cottage, micro, small and medium enterprises) with technological advancement, innovation and know-how today with necessary policy guidelines and reform.”

He said it is high time to support the SMEs and make them digitally equipped to grab future opportunities. As a whole, 9 million SMEs with 24.5 million workforces in diverse sectors from agriculture, manufacturing, trade and services to export-oriented sectors are recognised as the lifeline of the economy of Bangladesh.

Sameer called for subsidies and easy access to finance the SMEs, low-cost re-financing schemes for technology adoption, maximising adoption of FinTech, technology transfer, fiscal incentives like tax cut, rebate, rational tariff on innovation and technologies to motivate SMEs to turn into smart business.

“To facilitate enhancing our SME sector’s export capabilities, we should redefine the definition of SME by excluding ‘medium’ businesses as they are largely privileged. We need a central SME database with updated information,” he said.

He also endorsed foreign investments, easy technology transfer and cluster development for export-oriented SMEs.

Talking to the Daily Sun, Institute of Chartered Accountants of Bangladesh (ICAB) president Mohammed Forkan Uddin said there is no alternative to developing and promoting the SME sector to develop a country. The SME sector has created around 60% employees of the world.

“Group of companies should give SMEs a chance to do business by cutting their small product lines. Besides, import of SME products should be controlled through formulating a policy to grow our SME sector. Besides, the education curriculum should be developed based on Industries’ demand,” he recommended.

Challenges faced by SMEs, and recommendations

Industry insiders said the SME sector is facing various challenges including lack of digital engagement, infrastructure, skills and capacity development, limited technology transfer, higher Tax, VAT and tariff incidence for SMEs, absence of acts and rules regarding the transformation of SMEs to smart SMEs, limited adoption of 4IR technologies like artificial intelligence (AI), cloud computing and others, and limited awareness of internal tax management automation.

Economists recommended local technology development focusing on smart SME businesses, digital insurance or InsurTech (innovative use of technology in insurance) for SME protection, smart SME transformation fund creation by the Bangladesh Bank, and co-ordination of all relevant policies like SME Policy, Industry Policy, and National ICT Policy to invigorate this sector.

They also recommended formalising the informal entrepreneurs, easing connectivity with regional and global supply chains, ensuring discipline in business tax management, scaling up productivity, business operation and sales, and eliminating tax deducted at source (TDS) and giving cash incentives to boost the SMEs.

Executive Director of South Asian Network on Economic Modeling (SANEM) Dr Selim Raihan said the country’s SME sector is facing a number of challenges including capacity constraints, lack of policies and regulatory issues, financing, infrastructure and skills gap.

“Import tariff for SMEs in Bangladesh is a bit high. So, we should focus on faster customs and trade regulations to boost the sector,” the economist said.

Dr Selim recommended a conducive and investment-friendly tariff regime, consistent tax rates, predictable policy regime and stable macro-economic situation to facilitate the growth of the sector and capture the international market.

SME Foundation attempts to create sustainable MSMEs

According to the SME Foundation, it has provided services to 20 lakh entrepreneurs and given training to 50,000 entrepreneurs. It arranged 11 national SME product fairs and 86 regional fairs in 50 districts. The foundation awarded 48 SME entrepreneurs to encourage them.

The foundation distributed Tk300 crore among 3,108 entrepreneurs during the COVID-19 pandemic as incentive package and also sought a new allocation of Tk500 crore from the government to provide loans to entrepreneurs.

The planning ministry’s data showed that Bangladesh has 7.9 million SMEs. Of them, 93.6% are small and 6.4% are medium enterprises.

The government declared to increase the SME sector’s contribution to 40% from current 25% by 2040 to build a “Smart Bangladesh”. The UN has designated 27 June as MSME Day in order to achieve SDGs by 2030.

The SME Foundation Chairperson Professor Md Masudur Rahman told the Daily Sun that they have directly and indirectly provided services to around 20 lakh entrepreneurs. Of them, 2.5 lakh entrepreneurs were served directly through 4,283 activities.

“We created 12 digital services. To diversify SME businesses, we trained 20,000 women entrepreneurs. We also created 30,000 new women entrepreneurs under the “Esho Uddokta Hoi (Lets Become Entrepreneurs)” project,” he said.

He also said both the government and private sectors need to collaborate to sustain and support these entrepreneurs. An ecosystem will be created in the sector if SME Foundation, ICT ministry and private entrepreneurs work together.

“Creating new markets, transferring technology, and connecting entrepreneurs to markets are our tasks. Our main objective is to create sustainable MSMEs. We need financial support from the government to boost the sector which would help us to overcome post-LDC challenges,” he added.