Most SMEs miss business boon Fourth Industrial Revolution offers

An industrial breakthrough driven by everyday-evolving technological innovations shies away from smaller enterprises, in particular, across Bangladesh largely for blissful ignorance of the wonders artificial intelligence and technologies work, save few exceptions.

Sharmin Sultana Liza tries to make a difference in the pervasive setback. The proprietor of Shwapnil House makes coat, waist coat, and blazers by using handloom fabrics, coarse hand-woven cloth, and denim by using her own designs, in her factory in Khulna.

The small entrepreneur sells her goods mainly through online marketing and by attending various exhibitions and trade fairs home and abroad.

Of late, Ms Liza attended a training course, sponsored by the SME Foundation, on Artificial Intelligence (AI) tools. She now prepares contents for her online business page using the AI tool ChatGPT -- in an upgrade she never thought of before.

"In the past I had to spend huge time and money to make contents for my social media pages but now the AI tools help me to make high-quality contents easily at almost no cost," she tells The Financial Express about the switch.

Ms Liza says AI tools help her to convert contents to other languages, write business plan and use video in the contents easily. "Online marketing, product development, content development, and market selection for my goods have become very simple for me with the help of AI."

Kazi Borhan Uddin, the owner of Takwa Holidays operating tour and travels business, also makes good use of the artificial intelligence in business upgrade. His company organises group tours, provides services to get people visa and air tickets to perform Omrah Hajj, among others.

"After learning on how to use AI, now I can write very useful articles for my website. AI also helps me in designing, making attractive posters, and getting good photos and videos for my contents," he says.

"Had there been no AI tools, I might have to appoint a highly skilled person to get done the similar services that the latest technology provides me. The AI tools help me to lessen cost of doing business," Mr Uddin told The Financial Express.

Shwapnil House and Takwa Holidays are among few small enterprises, out of a total of 11.8 million cottage, micro, small, and medium enterprises (CMSMEs) across the country, which are trying to tap the emergent technological advances brought about by the current Fourth Industrial Revolution or 4IR.

The 4IR refers to the adoption of latest innovative technologies in industries, societal patterns, processes and practices. This revolution is characterised by the fusion of technologies like artificial intelligence, the Internet of Things, and robotics, fundamentally changing how people live, work, and relate to each other.

However, wide-scale interactions with the SME owners and policymakers reveal that Bangladeshi enterprises of such scale so far stay far away from harnessing technological advances driven the latest industrial revolution.

They list hurdles like lack of required policy support and capacity-building initiatives, difficulties in obtaining bank loans for making investment, market-entry barriers, lack of technological knowledge and weak digital infrastructures that stand in the way of advancement of SME sector and embracing new technologies.

A study titled 'The Fourth Industrial Revolution: Opportunities and Challenges for SMEs in Bangladesh identified various challenges limiting the use of 4IR-related tools and technologies in the cottage, small and medium enterprises that, economists say, could be the backbone of a vibrant economy of the country with necessary care.

The study found many SME owners having lacked knowledge about the existing 4IR tools and technologies and how to integrate them into their businesses. Also found are that 4IR-related tools and technologies are often expensive, posing financial challenges to the SMEs.

The owners also lack required training on how to use the 4IR tools in their businesses. "They are also concerned about the safety and security implications of adopting 4IR technologies," the study report mentions.

According to the preliminary report of the Economic Census 2024 of the Bangladesh Bureau of Statistics, there are some 11.8 million CMSMEs which contribute to around 30 per cent of the country's gross domestic product (GDP). A previous survey, carried out in 2013, shows that the SME sector employs over 20 million people, which accounts for nearly 85 per cent of total industrial- sector employments.

However, data show that they are deprived of necessary funding despite the fact that the government requires banks and financial institutions to disburse 25 per cent of total loans and advances to CMSME sector by the end of 2025.

In 2024, the banks and financial institutions disbursed some Tk 2.144 trillion to the CMSMEs, lower 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.

Finance Adviser Dr Salehuddin Ahmed recently asked the central bank to expedite fund disbursement in favour of CMSMEs as they were allegedly not getting adequate loans for expansion.

According to a World Bank study on SME financing in Bangladesh, US$2.8 billion worth of financing gap prevails in the MSME sector, where 60 per cent of women SMEs' financing needs are unmet, and lack of access to collateral is one of the key hindrances.

"Bangladesh lacked a single policy with systemic plan to enhance SME finance," it noted.

"While people are talking about the 4IR, our SME's are yet to embrace the previous industrial revolutions. Technology is being upgraded everyday, but we are staying far behind," says Mirza Nurul Ghani Shovon, president of the National Association of Small & Cottage Industries of Bangladesh (NASCIB).

He feels that until industry people become aware of the huge benefits of the adopting 4IR technologies and they are given required supports by the government to obtain the technologies, a wide-scale use of the innovations in the SME sector will remain far cry.

Mr Shovon suggests that the government introduce Bangladeshi SME products on the global market to enhance their demand abroad, which can help strengthen the financial condition of the small enterprises and thereby pave the way for them to adopt latest technologies.

"The SMEs do not get required loans to make products, let alone adopt high-cost artificial intelligence like technologies," he laments.

Anwar Hossain Chowdhury, Managing Director, SME Foundation, thinks though the use of AI in the SME sector in Bangladesh is in its early stages, interest towards this technology is gradually increasing among the stakeholders.

"Some technology-enabled small and medium enterprises, especially those based in urban areas, have started using AI for online marketing, customer service, and data analysis," he told The Financial Express.

Mr Chowdhury states that most SME owners have no idea about AI, big data, and automation. "The lack of quality data, skilled manpower, and appropriate technological infrastructure, weakness in the use of internet, computers, software, and high cost of advanced software/tools pose barriers for adoption of 4IR-related tools."

The SME Foundation, with its limited funds, provides training to enterprises on digital marketing, social-media analytics and content optimisation, automation in Facebook/Google advertisement management, providing instant customer service using chatbots, stock and inventory management, data analysis and business decision making, and creative content creation, among others.

In the fiscal budget for 2025-26, now days away, the SME Foundation has sought an allocation of Tk 5.0 billion to help enhance the contribution of SME sector to the country's economy.

Dr Khondaker Golam Moazzem, Research Director at the Centre for Policy Dialogue (CPD), notes that the SMEs in Bangladesh are yet to be linked with the 4IR mechanisms-automation, digitisation, and Internet of Things etc.

"They are even not a part of mainstream of fourth industrial revolution, let alone getting benefit by using the tools," he says about the drawback.

The policy analyst delves deeper into the disadvantages and says except those few working in the export-oriented sectors, most of the SMEs are still using traditional technologies, operating factories manually, almost there is no use of digital technology, and they are, in most cases, not a part of global supply chain.

Most of the SMEs have almost no industrial compliance, social compliance, and human- related compliance either in their manufacturing units other than those linked with the export-oriented sector. "The way the SMEs are developed in Bangladesh, question is there whether they will be able to take benefit of fourth industrial revolution or not," he notes, and prescribes the must-dos for a breakthrough.

"So, at first, we need to make SMEs ready to become part of mainstream supply chain. They have to be able to produce raw materials, intermediate goods, and finished goods and actively participate in their distribution. They have to attain capability to export goods alongside selling in local market."

He said Bangladeshi SMEs even cannot meet basic requirement and cannot even have basic facilities. "It is like a daydream that Bangladeshi SMEs will get benefited from the 4IR when they are in such a dire straight."

Mr Moazzem points out that in other countries, the SMEs are part of global supply chain-no matter whether they produce local-based handicrafts or traditional goods. They produce both intermediate goods and, in many cases, they also produce final goods.

"Their networking is also strong-even SMEs get foreign direct investments in some cases through which they become part of global supply chain."

He says many countries made rules and regulations in domestic markets stringent to force the SMEs to digitise their manufacturing units, become formal, and maintain compliance. The SMEs in India, Thailand, Malaysia, and China can be good example in this case.

"A large part of our SMEs remains in informal sector and they have no presence in supply chain and works non-traditionally. Thus, compared to many other countries, we are far behind to be part of 4IR and get benefited," observes Mr Moazzem.

syful-islam@outlook.com