Data, research dearth big barrier to SME sector development

Saidur Rahman is a commerce graduate who plans to begin a small business to make a living and also contribute to the country's economy through employment generation.

Before starting the venture, he wanted to conduct a study to select a suitable product and category of business, bearing low risks of facing challenges from the existing enterprises.

However, he failed to collect product-wise latest statistics on the number of existing small and medium enterprises (SMEs) and any projection on prospective sectors after a thorough search in government offices and SME-related private associations concerned.

The SME Foundation, a government body which works on promoting SMEs in the country, itself depends on the Bangladesh Bureau of Statistics (BBS) for required data.

The BBS conducts surveys once in 10 years. The SME Foundation itself does not conduct any survey on the SMEs. Thus, it has no product-wise data on SMEs and their contact details.

Last time this January, the BBS unveiled the preliminary report of the Economic Census 2024, which says there are 11.8 million cottage, micro, small, and medium enterprises (CMSMEs) in the country.

Several months have already passed, but the BBS is yet to publish a detailed report of the census.

Officials at the SME Foundation say they want to increase allocation to promote study and research on the SME sector. For the fiscal year 2025-26, the foundation plans to earmark Tk 19.1 million for this purpose, up from Tk 14.3 million in FY25.

The SME Foundation conducted and published a total of 17 studies and policy papers in a decade. The Bangladesh Institute of Development Studies (BIDS) has also conducted some studies on the SME sector.

The SME Policy 2019 set a strategic plan to institutionalise SME statistics and conduct research and development on this sector.

"In order to institutionalise the important contribution of the SME sector to the achievement of economic growth, necessary measures will be taken to ensure authentic statistics of SME sector," it mentioned.

It said SME-related research activities, technology-related research, and SME development activities will be more expedited.

Also, publications on different types of technological know-how and research activities in the SME sector will be strengthened through the increase of funding and substantial research initiatives.

The Ministry of Industries will establish an SME data bank, which will work as a research and data centre and will be associated with the main stakeholders. It will also coordinate the activities of all SME-related organisations.

However, things did not advance as planned. The Ministry of Industries did not set up an SME data bank, while no steps were taken to conduct research activities.

"None of the research-related activities, planned in the SME Policy 2019, have been implemented so far due to the non-allocation of specified fund for the same," said a senior official at the ministry.

The Industry and Labour Wing of the BBS previously conducted the Annual Establishment and Institution Survey (AEIS) on a regular basis to assess the status of economic units across the country by the number of labour employed.

According to one such report, the survey provided detailed data on establishments employing fewer than three, three to five, and six to nine workers - categorised into seven major sectors across all of the administrative divisions.

However, the continuity of this important survey appears to have lapsed. Muhammad Atikul Kabir, director of the Industry and Labour Wing at the BBS, could not confirm when the survey was last conducted and when the publication was discontinued.

"I have not heard of this survey being conducted since I started my career at the BBS," he told The Financial Express.

The most recent available report of the AEIS, for the fiscal year 1993-94, was found archived in the library of the BBS headquarters in the capital's Agargaon.

Similarly, the BBS discontinued its regular publication of the Informal Sector Survey after 2011. Economists have described the survey as crucial for understanding the CMSME sector in Bangladesh, where more than 86 per cent of the labour force is employed in the informal economy.

According to BBS officials, the survey was halted due to a lack of funding.

However, BBS plans to resume the Informal Sector Survey, said Mr Kabir. A meeting was held recently at the Statistics and Informatics Division (SID) to evaluate the Preliminary Development Project Proposal (PDPP) for the initiative.

The survey was identified as a priority in the National Strategy for the Development of Statistics (NSDS), a World Bank-funded project that the BBS has been implementing over the past five years.

The project's final report recommended that the Informal Sector Survey be conducted under the next phase of the NSDS, scheduled to begin in the upcoming fiscal year and continue through FY30.

Anwar Hossain Chowdhury, managing director of the SME Foundation, said the foundation keeps an allocation to conduct studies and research on the SME sector every year, but he acknowledged that the allocation is very poor compared to the needs.

He said a number of SME-related research papers have already been published by the foundation.

Mr Chowdhury, however, said the problem is hardly any measures are being taken based on the research outcomes. "Yes, we have some weaknesses to act accordingly."

"We have no required budget to take the necessary steps to resolve the problems and help boost the SME sector. There is lack of enthusiasm, lack of required government laws and policy support, and various other barriers exist," he said.

Mr Chowdhury also said, "If we want to resolve the problems that the SMEs have been facing in production, marketing, and financing, there is no alternative but to conduct research first."

The 11.8 million CMSMEs contribute around 30 per cent to the country's gross domestic Product (GDP), the latest BBS census shows.

A previous survey, carried out in 2013 shows that the SME sector employs over 20 million people, which is nearly 85 per cent of the total industrial sector employment.

In 2024, the banks and financial institutions disbursed some Tk 2.144 trillion to the CMSMEs, down from Tk 2.293 trillion in 2023.

In 2022, they had disbursed Tk 2.204 trillion to the CMSMEs compared to Tk 1.854 trillion in the previous year.

Dr AK Enamul Haque, director general of the Bangladesh Institute of Development Studies (BIDS), told The Financial Express most of the SMEs are funded by family or friends and financial constraints are the main barrier for boosting SMEs.

"The inclusion of SMEs in formal financing is the main challenge for the sector," he said.

They will be able to grow if the medium enterprise can work under sub-contracts with the large industries, he said.

"We need to conduct more research on the SME financing issue to give them a boost."

The central bank needs to conduct a good number of researches on how SME financing can be improved as it is trying to enhance SME finance, he said.

Mr Haque thinks that funding is also not adequately available for conducting research on the SME sector.

Also, he said accurate data is very much important to conduct research on any financial sector.

M Asaduzzaman, a former research director at BIDS, thinks that proper research is highly necessary to remove the obstacles the SMEs have been facing for long.

"Both the SMEs and large industries produce goods and services which people buy. Until they can identify the potential of their products and services, they cannot go for production. To get ideas about the potential of their produce, they need to conduct research," he said.

Also, they need to understand the linkage between one sector and another, which can only be identified through research, said Mr Asaduzzaman.

syful-islam@outlook.com