Chapter -1: Introduction

1.1 Background of the report

There is no chance to deny the fact that Bangladesh needs a sustained level of growth of small and medium enterprises (SMEs) in order to reduce poverty. Having predominance of agro-based economic activities, low level of technological development, lack of availability of highly skilled laborers, small scale businesses have been suitably developed in the country. Considering the country’s level of economic growth, composition of resources or natural resources, level of international integration, and growing urbanization, industrialization there is huge scope for developing diversified and new SMEs in agriculture, manufacturing, service sectors etc.

Scope of employment can be enlarged or widened both in rural and urban areas, which will help to reduce income inequality between urban and rural areas by SMEs. SMEs’ contribution to the economy is well-known.

According to BSCIC (2009), small and cottage industries accounted for 90.91 per cent of total industrial establishments in 20082009. About 90 per cent of total employment and more than 55 per cent of total manufacturing value added originated from SMEs. In another estimate, there are around 66000 small industry units and 611,612 cottage industry units, which provide employment of nearly 3.5 million people. When handlooms are added, the number of cottage industry units alone shoots up above 700,000 (BSCIC, 2009).

SMEs achieved considerable growth in different sub-sectors like, paper, printing and publishing; non-metallic mineral products; metal products; chemical; food, beverage tobacco etc. SMEs growth in Bangladesh is comparable with the growth achieved in different large scale industries in Bangladesh. However, a number of challenges have slowed down the development or growth of SMEs. In spite of its extensive coverage in manufacturing and service related activities, productivity of SMEs is not good in our country. In a number of sectors, there is no well-structured value chain developed between upper stream and lower stream.

It is true that growing urbanization in the country and rising per capita income at urban level have been creating demand for relatively ‘better’ quality products at a higher price, instead of ‘low’ quality products at lower price.

Currently, a larger part of this demand has been met up by low-priced, low quality imported products, because local SMEs are not able enough to provide satisfactory amount of better quality products.

Though SME is becoming gradually a rising industrial sector in our country and contributing more and more in export, this sector faces several problems like- lake of technical know-how, shortage of long term financial support, lack of skilled workers, marketing link, research and development. Naturally, development of competitiveness of local SMEs is the major challenge that has to be met in order to sustain and enlarge the growth of this sector.