The role of SME in economic development of Bangladesh is undeniable. This feature explains many significant facts related to SME finance, role of SME for economic development and recent stimulus to rejuvenate SME sectors.
This is the third episode of the series beyond pandemic. We are struggling to contain the corona virus and the economy of Bangladesh is equally fumbling to find a breathing space. Different economic indicators are showing grim numbers. From export earnings to remittance inflow we see downward trend. Bangladesh has been historically dependent on its small and medium enterprises (SME) to support a large portion of the economy. It is one of the single biggest sources of employment as well.
SME sector of Bangladesh has thrived on strong domestic demand over the years. In recent years this sector has started flourishing in export arena. It is also one of the largest sector where Banks and NBFIs disburse credit. According to Bangladesh economic review 2019 eight out of last 9 years SMEs received more than 100% of targeted credit per year. It was around BDT 165 thousand crore last year.
Since the beginning of the ongoing pandemic, we have seen how demand has dwindled and gradually SMEs lost momentum of regular flow. This entirely adds new challenge. Trading, manufacturing and services- all three subsector witnessed plummeting of business. As expected Government has intervened to save the sectors from farther nosedive.
Bangladeshi Government has announced stimulus package of BDT 20 thousand crore for SME sector as working capital at an interest rate of 4%. Besides we have seen stimulus on agriculture sector which in one way or another related with SME ventures. In total around BDT 35,560 thousand crore stimulus to be injected in the sector.
This will certainly bring some momentum in the economy of Bangladesh. Many people lost their jobs due to this pandmeic. Then again food production will be given top priority now and related industries with it will also see enhanced growth this year. New jobs will be created and more SME ventures will be opened. Slowly but steadily the economic activities are reopening therefore we will see the impact more visibly soon. Demand of SME finance in Bangladesh will go high.
The stimulus package alone however doesn’t ensure swift recovery of the economy of Bangladesh. But this promises to rejuvenate the ongoing recovery effort. To make it a success, few key intermediate milestones need to be achieved.
- First of all, the announced stimulus must go to the right hands. The selection of borrowers is key here. There can be a task force to oversee the progress and pave way for any hindrance that might cause problem to it.
- Secondly, hassle-free borrowing process for the investors must be ensured. The right amount of credit should be provided according to the need.
- Finally, related industries of the said sectors should be included to be the potential beneficiaries of the stimulus package. Otherwise the pivotal point of re-energizing the economy will fail.
Bangladesh has over the years won against natural calamity. We remained vigilant during global recession as well. This pandemic is a unique situation for us. We are on a perilous journey where proper implementation of plan can save us.