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Survey Analysis of SME

A.K.M. MAHMUD HOSSAIN 134

Definition
Across the world, the SMEs are defined on the basis of two criteria: volume of turnover and number of person employed in a particular organization. European Commission has defined SME sector as the businesses with fewer than 500 employees, and broken that definition down into three subcategories namely Micro-enterprise with between 1 to 9 employees, Small-enterprises with between 10 to 99 employees and Medium-enterprises with between 100 to 499 employees. On the other hand, the central bank of Bangladesh defines any business having a Net-Worth of up-to Tk. 10 Million or number of employees between 10 to 50 persons as small and business having a Net-Worth between Tk. 10 to 100

Recently we did a survey on some small and medium businesses. By this survey we just try to identify the present situation, future possibility on SME sector in Bangladesh. Now we are going to discuss shortly about the report from survey.

Skills
In our survey we found maximum businessman are skilled by born or you may say that they have from their environment. But they have nothing of well arranged skill from any institution or training or any others government steps. Till now, they dont have any proper guidelines and proper implementation that they expected from the government. Sometimes we faced situation of that they ranked them well skilled as their willing.

The SME sector has been treated as a priority sector in the Industrial Policy 2005. And it also mentioned in chapter 8, to create opportunity to give training, guidelines to increase public expenditure on private sector. But we didnt see any implementation of that law till now. Our national budget 201112 also contains nothing improve skills of small and medium businessmen.

Support
Our survey found that maximum Small businessmen did not have any support from any government organization, banks, international donors etc.

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Barriers
Resource scarcity High employee turnover Absence of modern technology Poor physical infrastructure Financial constraints Lack of uniform definition Lack of information Lack of entrepreneurship skills Participation of women entrepreneurs

 Access to Market and lack of awareness regarding the importance of marketing tool Bureaucracy Absence of transparent legal system Lack of commitment to innovation and customer satisfaction Lack of quality assurance Lack of research and development facilities Fierce competition with the cheaper foreign goods

The small and medium businessmen also identify some barriers according to their own point of view. The major problem a Small Business firm faces in its establishment period is the problem for capital or sufficient financing problem. Actually banks and other financial institutions are not really interested about giving a loan for a Small Business firm. But they are ready to help the BANKRUPTS.

 There are some problems with NGO for financing. They claim that they have a very high percentage of returning loan back but its only the one side of the coin. The other side says quite different a story. Sometimes they distribute loan to very much needy entrepreneurs in a high rate of interest. It is also often said that some NGOs practice some unfair way to get their loan back. They create much pressure to refund the loan. Sometimes they take away personal property of the loan receiver on force if he is unable to pay back the loan. A few debtors even got suicide enabling to refund the loan. Lack of necessary raw material is another problem. lack of necessary government plannings to up this

 Electricity, Gas, Water, Telephone etc. are some prerequisites for a business. In Bangladesh only the sufferer know how tough it is to get those connections. Political and social instability.

Those are the external barriers or problems. But there also some internal problems that we indicated when we did our survey.

These are -Cannot identify target market or target customer. -Does not plan. -Believes advertising is an expense not an investment. -Only primary knowledge of pricing policy and strategy. -Cannot identify trading area. -Cannot delegate. -Believes loan would solve every problem. All these problems are usually created by an unskilled management people.

Financing
We found some barriers are truly hampers the SMEs. Like financing Recent removal of the lending cap and increased government borrowing from banking sector (likelytocontinueFY2012) may push already high interest rates (interest rate on term/workingloan:10%-18%) even higher. Annual turnover tax for SMEs reduced to 3% from 4% (turnover marginTk.60lakh unchanged). Import tariff on capital machinery across the board should be set at1%(instead of current 1% for export-oriented and 3%for others). Loan from banks is more critical.

 A study (2004) by Micro Industries Development Assistance and Services (MIDAS) revealed that sources of finance are mostly friends and family member in case of SME. MIDAS tried to identify the sources of funds of SMEs. These are: Sources of funds Percentage of finance Informal sector 41% Family members 20% (interest free) 4% (with interest) NGO 17% Bank 18%

Growth Pattern of SME

MD. KAYSARUZZAMAN 102

Sector wise contribution of SME in GDP of Bangladesh (Taka)

Agriculture Fishing Manufacturing Construction Hotels and Restaurants Transport, Storage and Communication Health and Social Work Others

2 743 049 893 15 632 094 785

1 28

Should be done for developing SME sector:

 Development of infrastructure is essential for the optimum growth of SME. So government of Bangladesh needs to take appropriate policy strategy for the infrastructure development of Bangladesh. Government, financial institutions and Non Government Organizations (NGOs) may take necessary steps to ensure uninterrupted financial support to the prospective SMEs in Bangladesh. Due to the absence of uniform definition the policy formulation and implementations are not possible. Government should take initiative to develop a uniform definition of each category of SMEs. Govt. of Bangladesh should take the initiative to develop web pages exclusively for SME and an

 In order to ensure the retention of skilled workforce the government should make the entrepreneurial career attractive by minimizing the uncertainty. In order to encourage women entrepreneurship govt. may; involve women entrepreneurs in policy formulation and implementation, arrange funds for women entrepreneurs, provide necessary training to women entrepreneurs in rural and urban area of Bangladesh. SME foundation may take appropriate marketing tools to popularize their products. For minimizing red tapes and accelerating the growth of SME government may provide one roof service under the SME foundation.

 Appropriate legal framework is necessary to ensure the development of SME of Bangladesh. In this era of intense competition continuous planning and quality improvement act as a prerequisite for the survival of SMEs. In order to improve the quality SMEs can follow the Just in Time (JIT) philosophy and use Total Quality Management (TQM) and can ensure the improvement of quality and productivity at a time.

 Government should establish a credible certification authority especially for SMEs. So that this sector can obtain a technical evaluation of the quality of their products within a shortest possible time. The certification of the authority should be world wide accepted. Govt. may also provide assistance to SMEs during the certification process and promote the importance of product certification for international acceptance among the SMEs. Research and Development (R&D) is must for the development and growth of SME. So government must have to invest in R&D for ensuring the intensification of SME of Bangladesh. Restriction may be imposed on import of SMEs products

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Industrial policy of Bangladesh mentioned some actions but has no implementation in reality. Action 1: Devise proper and unified method of classification. Implementation status: no action has taken in this regard. Action 2: Ensure Flow of public expenditure. Implementation status:There had been no improvement in the quantum and quality of public expenditure directed towards training, extension, research etc for SME. Action 3: Stimulate private investment through proper guidance and pre-investment counseling. Implementation Status: There had been no tangible change in this regard.

 Action 4: Rationalize tax structure. Implementation status: Governments current effort to augment revenue collection did not provide any fiscal incentives towards SME. Action 5: Provide marketing assistance. Implementation status: Ministry of commerce has taken some action to enhance market linkage for our export in general through our foreign mission. However nothing specific has been done for SME products. Action 6: Stimulate sub-contracting activities. Implementation status: Nothing has been done in the last years.

Action 7: Design a credit guarantee scheme for small-scale entrepreneurs who do not have the necessary collateral. Implementation Status: There had been some effort towards collateral free credit to the small entrepreneurs in the recent past.

Governments policies & programs over small business are established, but it remains almost inactive to the SMEs.
We found in our survey that Bangladesh Small and Cottage Industries Corporation (BSCIC) collaboration is invisible to the SMEs. Many SMEs even dont know about it. But the budget 2011-12 disclosed that BSCIC already plays an important role in SME. It established 74 industrial estates across the country. employment has been generated for 3,93,000 individuals in 3,986 industrial units of the industrial estates established in different parts of the country. Yet CPD suggested to the government to Ensure more collaboration between BSCIC and NASCIB

There are some other steps taken by the government. Palli Karma-Sahayak Foundation (PKSF)
The Government established PKSF in May 1990. PKSF is distributing micro-credit among the poor through 225 large and small NGOs. Most of the beneficiaries are women. Credit Distribution Package SME Foundation

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Recommendation
Bangladeshi SMEs has lots of claim to say that indicates they faces many problems day to day. But according them government does not co-operate as their expectation. Increasing tax creates lots of pressure on them.

 Create a database for the small and medium scale industries Keep the limit of small industries at investment of 10 Crore Taka Channel funds to the small entrepreneur without collateral through innovative Banking Increase of the limit of collateral free loan to five lac taka and keep interest rate low (less than 10%) Formation of cluster village Establish a training and design center including computer design Ensure more collaboration between BSCIC and NASCIB

THANK YOU ALL