On the Road to SME Sector Development in Bangladesh: A Guideline Based on Current Challenges and Opportunities

On the Road to SME Sector Development in Bangladesh: A Guideline Based on Current Challenges and Opportunities

Syed Abidur Rahman (Universiti Utara Malaysia, Malaysia), Noor Hazlina Ahmad (Universiti Sains Malaysia, Malaysia) and Seyedeh Khadijeh Taghizadeh (Universiti Tecknolgi PETRONAS, Malaysia)
DOI: 10.4018/978-1-5225-2165-5.ch006
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Abstract

Entrepreneurship has been deliberated as multidimensional and multidisciplinary study. From the economic point of view entrepreneurship is the central force for economic development for any nation. Scholars and policy makers now have started to see entrepreneurship as panacea for inclusive growth. Entrepreneurships are most widely popular and discussed area. Study on small and medium sized enterprises (SMEs) has been maturing for the last decade as it has been regarded as significant player for the social development along with the economic development. In Bangladesh, SMEs account for a large proportion of the total establishments in various sectors. Considering the importance of the SME sector in Bangladesh, this study intends to explore and sketch-out the landscape of current SME setting in Bangladesh. With this aim the study has extensively carried out literature review, observed and understood the secondary data obtained from various organizations, and finally presented a policy driven recommendation (micro and macro level) which would enable to develop the SME sector in a developing country like Bangladesh.
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Objective And Research Methodology

The critical and in-depth literature comprising a holistic picture of the entrepreneurship development in Bangladesh found to be rare (Chowdhury, 2007). Till now not enough significant studies have been conducted in the academic field which would give an inclusive illustration of the small-medium enterprises in Bangladesh. In addition, discussion on the opportunities, challenges, and possible guidelines also found to be sparse. Therefore, considering the frail state of studies conducted in Bangladesh, this study has made an attempt to provide a comprehensive sketch on the geo-politic and socio-economic portrait of the country. The snapshot on such areas has triggered to embark on the main objective of the study. The main objective of the study is to offer a policy guideline for the SME development in Bangladesh based on the prevailing challenges and opportunities of the SMEs. To fulfill the objective the study will carry out review from the extant literature on Bangladeshi SMEs, identify the challenges and opportunities for growth of the SME sector in Bangladesh.

The study is descriptive in nature. The study will also consider the secondary data available from various data bank such as, The World Bank, Asian Development Bank, United Nation Development Program (UNDP), International Monitory Fund, Global Entrepreneurship Monitor. The study will also highlight the information and recommendation from the renowned local research institutes such as, Bangladesh Institute of Development Studies (BIDS), Centre for Policy Dialogue. Combining and cross checking the obtained information, the study will offer a guideline for the SME development in Bangladesh.

Key Terms in this Chapter

SMEs in Bangladesh: In manufacturing sectors of the SMEs, medium enterprise would be those with assets worth US$14 to US$42 million (minus land and factory building, and including replacement value) and/or 100 to 250 of workers. In service industry, medium enterprises will be those which employ 50 to 100 employees and have assets (defined as above) worth of US$ 0.1 to US$ 2.1 million. In manufacturing, small enterprise would be those with assets worth US$71 thousand to US$1.4 million (defined as above) and/or 25 to 99 workers. In service industry, small enterprises will be those which employ 10 to 25 and have assets (defined as above) worth US$7 thousand to US$1.4 million.

Poverty in Context of Bangladesh: In context of Bangladesh, poverty has been referred to the inequality in income, poor infrastructure, lack of education, poor health, inefficient public sector, lack of work opportunities, low wage rate, population growth, and lack of human resource development.

Grameen Bank: Grameen Bank is the mother institution of micro-credit and GrameenPhone. a leading telecommunication company in Bangladesh. The Grameen Bank facilitated the rural women of Bangladesh to be an entrepreneur and contributed the overall national development.

Strategic Development Paradigm of Bangladesh: The predominant objective of strategic development paradigm of Bangladesh is speeding up socio-economic development, eradicating poverty, and reducing income disparity and regional inequality.

SMEs’ Barriers in Bangladesh: Access to appropriate information, frequent harassment by government officials who extort money and regulatory barriers, access to finance, poor infrastructure such as bad roads inadequate water shortage, erratic gas and electric supply, and a poor telecommunications system, low capitalization and limited assets, geographical diversity and high mortality, poor credit knowledge, very limited access to formal source of credit, lack of modern technology, irregular/inadequate supply of power, poor physical infrastructure and high transportation cost, poor information about market opportunities and requirements, inadequate availability of raw materials, lack of research & development facilities, absence of operative and transparent legal system, difficulties in accessing technology, credit constraints, and most importantly the political instability.

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