The Financial Express

Trading major business of Bangladesh SMEs: Survey

'Potential' sector remains untapped, say analysts

| Updated: November 25, 2020 14:22:46

Evaly and Fianancial Express Evaly and Fianancial Express
Trading major business of Bangladesh SMEs: Survey

Trading has emerged as the most dominant SME business in Bangladesh followed by manufacturing, according to a latest survey released on Tuesday.

The survey said some 69 per cent SMEs is involved in the trading sector while 18 per cent in manufacturing. The service sector consists of over 9.0 per cent.

And 95 per cent of the enterprises cater to local markets. Only 1.3 per cent was catering to the export market.

These are the key findings of the survey, conducted jointly by IDLC Finance and think-tank Policy Research Institute of Bangladesh (PRI).

PRI Director Dr Bazlul Haque Khondker presented the findings of the survey in a virtual platform while its executive director Dr Ahsan H Mansur and CEO and managing director at the IDLC Finance Arif Khan were panellists.

Professor of economics at the University of Dhaka Dr Sayema Haque Bidisha moderated it.

The size of the sample was 782 IDLC SME clients across the country and the period was later part in 2019.

The survey said 92 per cent SMEs start businesses with their own resources while some 3.0 per cent funds come from family and friends.

Only 2.8 per cent of resources comes from institutional sources, of which IDLC accounts for 1.0 per cent.

The study reveals 105.7 per cent growth in employment generation by SMEs from its inception time.

The largest growth rate has been found for salaried jobs with 134 per cent over the entire period.

It said the turnover in Chattogram is almost double those of the other three regions.

Dr Khondker said this finding may help the IDLC and other institutions engaged in SME lending to review their regional credit portfolios.

He said the doubling of enterprise turnover in the four-year period through 2019 was a healthy development.

He said the employment growth in female-owned sample enterprises was 45.7 percentage points above the growth rate recorded in male-owned sample enterprises.

He said the average employment size for IDLC enterprises stood at around 16 people per enterprise, which is close to the national average.

Speaking at the programme, Dr Mansur said 92 per cent SMEs start their business with their own resources.

"This is very much unfortunate; if it were inverse then we would have been satisfied," he said.

But he said lending to the SMEs has many challenges and none can lend huge volume of the loans to SMEs overnight.

He said this is the most potential sector, but remained untapped in Bangladesh.

"There is a need for preparedness for lending to the SMEs," said Dr Mansur, also chairman of BRAC Bank.

He said his bank now wants to scale up SME financing to 60 per cent of its total portfolio from the existing over 50 per cent.

He noted the adequate funding in the banking channels now is comfortable for lending to the SMEs under the single-digit regime.

IDLC works for women entrepreneurs too.

"We have seen a positive impact in the economy for such effort from the research findings. The findings of the study reinstate the fact that funding MSMEs is not only profitable, this also has important macro-economic impact such as employment creation," Mr Khan said.

He said the SME financing has been creating huge employment in the country.

"If we annualise it, it is around 8.0 per cent", he said.

He said, "We all know the importance of the SMEs, but going back to the home, we will again look for corporate clients for lending".

SMEs account for about 45 per cent of manufacturing value addition, about 80 per cent of the industrial sector employment and about 90 per cent of total industrial units. They employ approximately 25 per cent of the labour force.

The industrial sector makes up 31 per cent of the country's gross domestic product (GDP), most of which is coming from SMEs.

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