Small and

Medium
Enterprises
(SMEs)
“A good leader makes the
impossible, possible.” Greatest Contribution

The possibility that

people from humble backgrounds can
create multi-billion-dollar companies only
N. R. Narayana on the basis of a
Murthy vision,
passion, and
Founder of Infosys hard work.

Source: Textbook
“A good leader makes the
impossible, possible.” Greatest Contribution

The possibility that

people from humble backgrounds can
create multi-billion-dollar companies only
N. R. Narayana on the basis of a
Murthy vision,
passion, and
Founder of Infosys hard work.

Source: Textbook
 SMEs Introduction
→ One of the most vibrant sectors of the economy.
→ Breeding ground of entrepreneurship at the grassroots level.
→ Generates large scale employment and therefore very effective tool for poverty
alleviation.
→ Accounts for a major share of industrial production and exports.
→ Fosters effective, efficient, flexible and innovative entrepreneurial spirit.
→ Provides ancillary support to large enterprises.
→ Promotes balanced regional industrial growth.
→ Protects local handicrafts and cultural products.
→ Ensures regional and backward area development.
 Role and Importance of SMEs

• Small and Medium Enterprises (SMEs) are treated as the

engines of growth and drivers of innovation worldwide.
• Every year about 2 3 million young people join the country's
workforce. Half of them find jobs at home or abroad. So, it has
become a challenge to create more jobs so that the rest can be
employed. SMEs can be an answer to the problem.
 Role and Importance of SMEs

IN BANGLADESH
• SMEs comprise over 90 per cent of businesses
•
Employ over 20 percent of the adult population.
• Some of the
world’s largest
enterprises started
from very humble
beginnings. Some
had their origins
even in garages.
SMEs are an
important vehicle
for ED*
*ED = Entrepreneurship Development
 Role and Importance of SMEs

• It is a cost-effective source of employment. For example, a study

reports that CUFL* and JFF** required BDT 14.26 and 11.63 million
($241,000 and $198,000) respectively for every person to be
employed.
But, in case of microenterprises, set or encouraged by the NGOs
for self-employment of the very poor, the investment required per
employment is BDT 5,000 ($85) or less (SDC & BUP, 1998).
*CUFL = Chittagong Urea Factory Limited
**JFF = Jamuna Fertilizer Factory
 Definition of SMEs
• The definition of SMEs vary from country to country. Countries
vary on the bases on which the categorization of enterprises is
done. India uses annual turnover of enterprises as the basis.
• The Industry Policy 2016 of Bangladesh has given the definition of
SMEs based on the value of fixed assets excluding land and
factory building (including replacement cost) and number of labor
employed.
• Enterprises are categorized as micro, small, medium or large
enterprises based on the given criteria.
 Micro Enterprise refers to the firm/business
which is not a public limited company and complies the
following criteria:
Micro Enterprise

Fixed Asset Labor

Manufacturing 10 lakh to 75 16 to 30
lakh

Service Less than 10 lakh Maximum 15

 Micro Enterprise

Fixed Asset Labor

Manufacturing 10 lakh to 75 16 to 30
lakh

Service Less than Maximum

10 lakh 15
 Small Enterprise refers to the firm/business
which is not a public limited company and complies the
following criteria:

Small Enterprise

Fixed Asset Labor

Manufacturing 75 lakh to 15 31 to 120

crore
Service 10 lakh to 2 crore 16 to 50
 Small Enterprise

Fixed Asset Labor

Manufacturing 75 lakh to 15 31 to 120

crore

Service 10 lakh to 16 to 50
2 crore
 Medium Enterprise refers to the establishment/firm which
is not a public limited company and complies the following
criteria:

Medium Enterprise

Fixed Asset Labor

Manufacturing 15 crore to 50 121 to 300

crore
Service 2 crore to 30 crore 51 to 120
 Medium Enterprise

Fixed Asset Labor

Manufact 15 crore 121 to

uring to 50 300
crore
Service 2 crore to 51 to 120
30 crore
SMEs in Bangladesh: Environment
 SMEs in Bangladesh: Environment

• SMEs fall under the Ministry of Industries of the Government of the

People’s Republic of Bangladesh. It has a dedicated SME Cell for SMEs.
• SME Foundation is primarily responsible for implementing policies &
strategies for promotion, expansion and sustainable development of
SMEs of the country. 
• The Bangladesh Bank help SMEs get financing by instructing banks and
other financial institutions to give loans to SMEs. The current circular
instructs that 20 per cent of all bank loans must go to the SMEs.
 SME Foundation (SMEF)
• The Small & Medium Enterprise Foundation, widely known as SME
Foundation, is a company limited by guarantee and licensed by the Ministry of
Commerce as a not for profit organization and registered under the Companies
Act (Act XXVIII) of 1994.
• It is running under the guideline as stated in the Memorandum and Articles of
Association. SME Foundation is established by the Government of Bangladesh
through Ministry of Industries as an apex institution for SME development in
the country.
 SME Foundation (SMEF)
Vision
Promote Small and Medium Enterprises (SMEs) for alleviating poverty,
generating employment and thereby accelerating economic growth.
Mission
Assist for promoting the growth of small and medium enterprises of all the
productive and service oriented enterprises of the national economy for facing
the challenges of free market economy and globalization.
 SME Foundation (SMEF)
Objectives
Aligned with the Memorandum of Association the objectives of SMEF could be listed as below:
a) To promote, support, strengthen and encourage the growth and development of SMEs.
b) To plan, program and finance interventions for delivery by private sector organizations.
c) To institute SME Awards in order to promote competitiveness among the SMEs.
d) To facilitate SME access to finance by creating and supporting appropriate strategies and institutions.
e) To rationalize public sector approaches and support structures for SME development.
f) To create a pro-growth and pro-poor business environment.
g) To create appropriate incentives, mechanisms and support structures to facilitate the formation of new
enterprises.
h) To identify and report policy anomalies, market and institutional failures that are prejudicial to the legitimate
interests of SMEs.
i) To create a database on SMEs and SME sectors.
j) To encourage in building linkage among the national and international institutions working for SME
development.
k) To develop capacity of public and private sector SME service providers.
l) To enhance productivity,
 SME Foundation (SMEF)
• The major activities of SME Foundation are implementation of SME Policy
Strategies adopted by the Bangladesh Government, policy advocacy and
intervention for the growth of SMEs, facilitating financial supports for SMEs,
providing skill development and capacity building training, facilitating adaptation
with appropriate technologies and access to ICT, providing business support
services, etc.
• It is mentionable here that the Foundation is working for the development of
enterprises and entrepreneurs who belong to micro, small and medium categories
as per Industrial Policy 2016.
• Besides the general supports to the development of SMEs and entrepreneurs the
Foundation is providing diversified supports to the existing and potential women
entrepreneurs in order to position them into the mainstream business community.
 Broad Activities of SMEF
⌂ Access to finance
⌂ Women Entrepreneurship Development
⌂ Business Support Service
⌂ Policy Advocacy
⌂ Training
⌂ Access to Technology
⌂ ICT for SMEs
⌂ Research and Publication
See SMEF website for details. www.smef.gov.bd
 SME & Special Programs Department
(SME&SPD) in Brief – Bangladesh Bank
• SME & Special Programs Department (SME&SPD) is one of the significant outcomes of
Bangladesh Bank (BB)’s policy paradigm shift to add financial inclusion to its traditional
goals of prudential regulation & financial stability.
• This department started its journey in December, 2009 towards the development of
CMSMEs* in Bangladesh by improving the existing environment in the banking sector
through regulatory & policy interventions.
• SME & Special Programs Department is playing a pivotal role to ensure country’s inclusive
& sustainable economic growth through CMSMEs development with a special focus on
financially excluded, unbanked people & women entrepreneurs.

* Cottage, Micro, Small, and Medium Enterprises

SMESPD in Brief
• BB identified Cottage, Micro, Small & Medium Enterprises (CMSMEs) as a top priority sector for rapid
industrialization, employment generation, poverty reduction, gender equality & overall economic growth
of Bangladesh.
• To develop the sector, this department provides refinance facilities to Banks & Financial Institutions at a
relatively cheap rate against their financing to CMSMEs.
• Currently, Bangladesh Bank is providing refinance facilities to banks and financial institutions from
Bangladesh Bank Fund, Revolving Fund Account of JICA assisted FSPDSME Fund & Urban Building Safety
Project, Small Enterprise Refinance Scheme, Agro-based Product Processing Industries Fund, New
Entrepreneurs Fund and Islamic Shariah Fund.
• A target based lending to CMSMEs has been initiated since the inception of this department.
• This intervention for engendering SME finance has been declared as international best practice for SME
financing by Alliance for Financial Inclusion (AFI) in 2014.
• All banks and financial institutions have been disbursing credit to CMSMEs following their indicative
target set on a calendar year (Jan-Dec) basis.
• SMESPD has been taking multifaceted initiatives for developing the Cottage, Micro, Small and Medium
Enterprises (CMSMEs) including women entrepreneurship development all over the country.
 Problems faced by SMEs in Bangladesh

SMEs face various challenges from marketing of products to access

to finance.
• Lack of Access to Finance: Even though the BB requires that 20
percent of all bank loans will go to SMEs, majority of the SME
entrepreneurs especially women cannot manage to get loans
from banks even after fulfilling all criteria. The BB should
impose strict monitoring upon loan allocation by banks to
identify if any ineligible entity is getting the loan.
 Problems faced by SMEs in Bangladesh

• Failure to ensure quality/proper perception

about quality: Due to the lack of national quality
policy and adequate support system, lack of credibility in
the quality certification authority SMEs of Bangladesh fail
to ensure the quality of products and services both in
domestic and international markets (Ahmed, 2004).
Measures for quality improvement and standardization of
SME products must be taken and the BSTI must be made
more effective.
• Lack of skilled manpower
Lack of skilled manpower is a perennial problem in Bangladesh. This problem is
particularly acute for small and medium scale export oriented enterprises. The
value addition of the products is low in even the RMG sector where Bangladesh
has made commendable performance in the world market. Bangladesh cannot
make much entry into high value fashion wear exports due to dearth of trained
workers.
• Inadequate Training Facility
Training facilities for SME workers and development of entrepreneurial skills are
not adequate in our country. Special programs are to be undertaken for the
establishment of training institutes regarding relevant technical skill and
entrepreneurship development.
• undeveloped sales channels and lack of promotional support services
SME entrepreneurs are at the bitter end in respect of marketing of products as
they cannot make adequate investments in marketing and also lack necessary
marketing skills. Successful marketing requires having a well-planned marketing
strategy including advertisement campaign as well as resources for implementing
that strategy.
• Difficulties in procuring raw materials and dismal state of utilities
In Bangladesh scarcity of raw materials hinder the ability of SME to be export
oriented and limits its ability to reach more advanced stages of international
business. Moreover, Inadequate supply of necessary utilities like electricity, water,
roads and highways hinder the growth of SME sector.

Lack of access to relevant business information, low technological capabilities,

cumbersome and costly bureaucratic procedures are also some major hindrances for
growth of the SME sector.
 Policies By the Government of Bangladesh for SMEs

• The country's industrial policy has, of late, identified SMEs as a thrust

sector.
• The Ministry of Industries has set up an SME cell as part of the policy
and strategy for the expansion of the SME sector. The ministry has also
formed an SME panel with representatives from the private sector to
help the government implement the recommendations of the SME
Taskforce.
• The Federation of Bangladesh Chambers of Commerce & Industry
(FBCCI) has taken up steps to collect district-wise data to open a SME
website. It is also planning to turn its SME cell into an institute for the
development of the SMEs.
 Thinking about the future SMEs of Bangladesh

• Coping with the advances in technology: The advances in

technology labelled as Industry 4.0 requires new set of skills.
• In order to address the emerging situation, the country's SMEs
should adopt new technologies to boost their business, as they
are the backbone of the economy.
• There is an urgent need for bringing immediate change in
technical and IT-related curriculum in universities as well as in
technical and vocational training institutions, especially in the
public universities.
Thank You