Institutional Role in the Development of Women Entrepreneurship in Small and Medium Enterprises ( SMEs )in Bangladesh

Abstract

Small and Medium Enterprises (SMEs) play an important role in an economy due to their contributions towards employment generation, improvement in income distribution, poverty alleviation, growth of manufacturing output and exports, and boosting rural development. The current development paradigm in Bangladesh aims at achieving accelerated economic growth with declining poverty, income inequality, and spatial disparity through ensuring Women participation in SMEs. Light Engineering (LE) sub-sector of SMEs is a potential sector of SMEs which has about $ 8.2 Billion market demand in Bangladesh. Women participation in this potential sector need to increase through Government policy supports. The key approach to achieve these goals is to boost growth in manufacturing and service sectors and induce the labour force to move from low-return agricultural and informal activities to these high-value added yielding Light Engineering Sub-Sector of SMEs. The development of Small and Medium Enterprises (SMEs) is considered to be a vital element in this development strategy for achieving Sustainable Development Goals (SDG) The study intends to analyze the role of the SMEs and the necessity of financing SMEs in the changing business environment at home and abroad. It aims at reviewing the present status of SME financing and evaluating the administrative and policy reforms for facilitating SME financing as well as LEEs financing. It also tries for assessing the role of the concerned agencies in relation to SME finance, and its support services along with the availability of institutional credit facilities for SMEs as well as LEEs. The study also attempts to identify the problems, challenges and opportunities of financing SMEs in Bangladesh and also to suggest remedies. The study is of evaluative type. Survey method and documentary analysis method have been used here. Both quantitative and qualitative data are used in this research. These data were collected through close ended questionnaire, in-depth interview, discussion with the concerned persons, seminars, workshops and other published and unpublished sources. The sample respondents of the study are selected purposively. About 65 percent respondents are taken from LES while 15 percent respondents are taken from FIs. The rest of the respondents include concerned government executives, scholars, journalists, SME artisans, successful entrepreneurs. The number of respondents was 210 in total out of 600 Women Entrepreneurs in Light Engineering manufacturing sector from the database of BSCIC. The study areas are Sutrapur Thana from Dhaka, Kutwall Thana ,Comilla Kutwali Thana ,from Bogra and Chittagong District for surveying the entrepreneurs in LE sub sector of SMEs. At present, the SME sector is envisaged as the 'Driving Force' of economic growth and employment in the developing countries like Bangladesh due to the requirement of low level of capital, tradition bound technology, agro-based resources and availability of cheap labour forces. xi But, a very few studies on the contemporary issues of SMEs had been carried out earlier in the academic level. For this reason, this study is necessary for the policy makers and other stakeholders in Bangladesh for realizing the importance of Women Entrepreneurial initiative in Light Engineering manufacturing sub sector of SMEs in Bangladesh. Bangladesh is now in the trade liberallzation .process and she is facing the market competitiveness where international trade is going to be duty free to a great extent and the facilities like GSP are being gradually withdrawn for LDCs. Again, the current global economic meltdown has also created ample of opportunities, like capital machinery import for having new import substitute industries, exporting indigenous and environment friendly goods produced in the labor intensive industries, attracting FDI, increasing RMG export, creating job market in the abroad and so on. But, in spite of being a formidable multiplier of economic growth trade liberallzation is now yielding the risks of widening inequalities within a country and among the nations. Now food security, environment friendly production, sustainable development etc., are getting importance. In this regard, Bangladesh can be a giant partner to supply her agro-based items including food and diversified jute products. The country also -as now more accessibility to information, technology, market exploration, International Capital and resource mobilization. But, for this, SME development, ensuring congenial investment climate, and its financing are significant components. In such situation, the country needs to undertake long run programmers and measures for building capacity, reforming legal, regulatory and administrative frameworks in all respects, creating a grand fund and incentive packages. The study also finds the gaps in case of following market based production model, innovating market networking, taking measures on tariff structure and dumping. The corporations need to introduce subcontracting in the production processes. The lending programmer of the Fls is unable to meet the total requirement of the SME clients. The Fls still now favor the large enterprises. The trade and service sector SMEs get the lion's share of finance while the manufacturing SMEs have very limited access to finance. The amount of total SME outstanding loan disbursed up to December 2018 by the Fls is Tk.43, 43,953.44 laces. The PCBs provided more than half of the total amount while the NCBS disbursed 35 percent followed by the SCBS with 7 percent only. The NBFIs disbursed only 3 percent. The banks provided Tk. 46405 laces in the manufacturing sectors up to June 2019. The NCBS provided more than half of total manufacturing loan while the PCBs disbursed 35 percent. Only 11 percent is disbursed by the SCBS. The manufacturing sector gets 61 percent of total SME loan disbursed by SCBS, where BASIC Bank in the top position followed by BRAC Bank PLC in providing SME loans to the Entrepreneurs. xii The sources of institutional finance are banks, finance companies, cooperatives, NGOS, Owner's Associations and BSCIC while the informal sources are self, family, friends, relatives and money lenders. Brokers and big enterprises also provide advances in case of subcontracting. Some of the entrepreneurs take finance from different sources at a time. About 43.6 percent entrepreneurs get access to institutional finance while 27.9 percent of them have access to bank finance. About 43 percent small enterprises have access to institutional finance while it is 78.2 percent for the medium enterprises. The NGOs and cooperatives are also scaling up their micro refinance to SME finance to some extent. Only 4.69 percent loan goes to its manufacturing sub sector which is very low. Industrial Policy-2022 has given much emphasis on Light Engineering Manufacturing sector in order reduce the import of spare parts of other industries of Bangladesh. This policy will have multifarious impacts on our economic growth to achieve SDGs. The average rate of interest of SME lean is 11.5 percent while the maximum rate of interest is 20 percent (NGOs). The average amount of SME outstanding loan disbursed per unit of the FIs is TK 6.27 crore. Most of the entrepreneurs didn't get expected amount of loan after application to the FIs. It is also found from field investigation that the large enterprises and the SMEs of trade and service sub sectors are in the priority list of the financers in spite of highest priority given to manufacturing industries especially in Light Engineering sub sector in IP 2022. Most of the enterprises surveyed are immature in all respects and the Fls are also inefficient in selecting eligible clients. About 44 constraints are identified by the respondents of this study. The prime impediments are lack of bank-client relationship, high rate of interest, collateral, cumbersome procedure of loan approval, lack of rationality in value system, socio-cultural mindset, lack of political commitment, stereotype policies, lack of government's follow-up, colonial attitude of the bureaucrats, corruption, lack of honest entrepreneurs and officials, high risk, low productivity, lack of necessary legal and regulatory framework, political and other influences, want of trained operational officials and so on. There are some challenges which the country will have to overcome for increasing finance in the SMEs sector. It is now necessary to reduce cost of doing business, determine the rate of interest in a single digit, increase venture financing, outreach of credit guarantee mechanism and to innovate new lending technologies. The country also needs huge power generation, infrastructural development, human resource development by emphasizing on Technical education establishment of required number of research institutions and incorporation of ICT into the sector. It is necessary to start up broad-based technical and vocational education, introduce entrepreneurship in the curriculum. xiii According to the findings of the study the researcher has made some recommendations for the government and other stakeholders. The following recommendations have been suggested by the researcher : • The government should take incentive financial scheme of Technical and Vocational Education for Women. This will help to motivate Women Entrepreneurial Skill in Light Engineering sub sector of SMEs in Bangladesh. Researcher investigated Bangladesh Government’s TVET policy of 2020 and 2022and found no specific guidelines to motivate Women to participate in TVET in order ensure supply side policy of Women Entrepreneurship in Light Engineering sector. • Bangladesh Bank should ensure dedicated SME desk for Women Entrepreneurs in every NCBs and PCBs and SCB in order to ensure that Women Entrepreneurs are getting proper service. It is also desirable to ensure that designated bank officials of Women Entrepreneurship desk will be female officers. • The government should undertake long run pragmatic programmes to flourish labour intensive, indigenous and environment friendly production such as agro-based, food, diversified jute, RMG and light engineering items. Backward and forward linkages in all respects especially in case of RMG sector which can help to promote brand image of the country in the arena of international trade and commerce . • The government should create a grand fund only for financing manufacturing SMEs. The amount of manufacturing SME finance should be more than that of the trade and service SMEs.All government and donor funds should be disbursed to the manufacturing SMEs in lieu of trade and service. • The government and the other concerned agencies should design specific programs such as foreign training, incorporating high-tech machineries into production process, increasing international cooperation in quest of technology assimilation, exploring global trade networking and increasing access to electronic and ICT etc. • The SMEs should follow market based production model in their production System. Women owned enterprises also should produce diversified range of products which Women Entrepreneurs are feeling more comfortable to produce like Car/Vehicle decorative parts and accessories which has huge demand both in domestic market and international market. Therefore, Light Engineering defination need to redefined in the Industrial policy. • The definitions of SMEs given by Mol, BB and other support service agencies should be uniform for the economy. The concerned agencies should provide all data and information following that given specific definitions, especially for the Women Entrepreneurs. • The SCBs should provide finance only for the manufacturing SMEs as well as industrial Women owned enterprises in lieu of service and trade sub sectors. At least, one of the banks should be transformed into a SME bank which will not work for earning profit except for its maintenance cost recovery. The bank will work with manufacturing SMEs where the interest rate of financing will be the minimum, that means single digit interest rate for the Women Entrepreneurs in Manufacturing sector. xiv • The government should formulate pragmatic financing policies as well industrial policies with some specific goals in lieu of hundreds of goals as set in the present stereotype policies. The concerned persons of the government should have to be committed and responsible in realizing such policies along with strong mentoring and monitoring role. • The government should establish a separate ministry for SMEs where the functionaries will be incorporated with the experts of the sector and bring administrative reforms in the support service provider agencies along with BSCIC. The nature and practice of bureaucroreacy of the country is one of the major challenges in the way of SME development in our country. Efficient bureaucroreacy, bankers, officers and entrepreneurs may jointly come forward to help the progress of SMEs and economic development. In addition,we need to consider the role of informal organization like societal attitudes, family, culture and religious principles in our policies and strategies. In this case, we should integrate formal Institutions policies and strategies with informal Institutes’norms and beliefs through mutual cooperations and understanding.Everbody should realize that Women are part of our society and without the progress of Women Entrepreneurship in SME, it would be impossible for the country to achieve Sustainable Development Goals(SDGs) by the year 2030 and without which our dreams to be Middle Income Country will remain incomplete. Researcher believes that this study will influence prospective Women Entrepreneurs to think and act positively like Hawthorne study Effect in Light Engineering sub sector of SMEs in Bangladesh.