Potentials of generating huge employment in SME’s untapped: Experts

Reza Mahmud:

Potentials of generating huge employment generation in Small and Medium Enterprise (SME) sector are remaining untapped due to lack of loan availability, experts said.

Professor Mustafizur Rahman, the Executive Director of the Centre for Policy Dialogue (CPD), Anwar Hossain Chowdhury MD of SME Foundation, and businessman Sakif Shamim (FBCCI Vice President candidate and Managing Director of Labaid Cancer Hospital & Super Speciality Centre) shared their similar vision of less of loan facilities which created vulnerability for SME sector and foiled the scope of huge job creations in the sector.

Anwar Hossain Chowdhury said the SME sector does not have a loan default culture, with repayment rates being nearly 100 percent. Yet, unfortunately, banks and financial institutions show little interest in lending to this sector. In contrast, those who default after taking thousands of crores in loans continue to get renewed facilities. This discriminatory system must end. He stressed that strengthening the SME sector will boost economic growth and reduce poverty, as SMEs directly create self-employment. Highlighting the limitations of the SME Foundation, he said: “We requested Tk 10 billion from the government. So far, we have received Tk 5 billion, which we distributed to entrepreneurs at only 6 percent interest through 18 banks and 5 financial institutions.”

Professor Mustafizur Rahman said the policy requiring banks to allocate at least 25 percent of loans to SMEs, the formation of a youth fund, and financial support for migrant workers are commendable initiatives by the interim government. He pointed out that SMEs contribute the most to employment generation in the country, yet remain the most neglected. Entrepreneurs cannot secure sufficient funds for investment despite repeated efforts. The SME Foundation was created to ensure easier access to finance, yet entrepreneurs still don’t receive adequate support from it. Similarly, although Bangladesh Bank instructs commercial banks to lend to SMEs, banks remain uncooperative. Moreover, defining SME entrepreneurs is also problematic, creating additional complications. He warned that without prioritizing SMEs, the Sustainable Development Goals (SDGs) cannot be achieved. Giving importance to SMEs will create employment across households and enrich the national economy.

Sakif Shamim noted that nearly 80 percent of the industrial workforce is employed in the SME sector. Given the reality, it is clear that without sufficient financing, SME development is extremely difficult. He reiterated: “We have long been calling for easy and low-interest financing for SMEs. Yet, there are no low-interest loans. With 14-16 percent interest rates, no SME entrepreneur can sustain their business.” He added that while Palli Karma-Sahayak Foundation (PKSF) provides loans through microfinance institutions, this remains insufficient. PKSF’s capacity must be further enhanced. Liquidity flow to SMEs must increase, interest rate burdens must be reduced, and inclusive banking services must be expanded. Banks should also have dedicated work plans to serve SMEs.

At present, employment generation is critically urgent in Bangladesh. GDP growth without job creation cannot ensure overall progress. To reverse stagnant employment growth, increased lending, allocation, and investment in SMEs is the only alternative.