Leveraging demographic challenges through transformative youth-led MSMEs

Bangladesh, historically recognised for its young population and a median age of 26, is now at a crucial turning point in its demographic transition. Young population is the most important resource that can contribute to accelerated economic and social development of a country. A proportional increase in the youth population is linked to higher GDP growth in the long run. If youth are engaged in economic activities of the country in a well-coordinated manner, they can be a formidable force in taking the country forward. Again, high youth dependency ratios can have a negative effect on economic growth if the youth are not productively engaged or if dependency burdens are high. According to Freeman and Wise, (1982), youth unemployment can result in demoralisation, depreciation in human capital and social exclusion.

The labour-intensive MSME sector (Micro, Small and Medium Enterprises) plays a vital role in Bangladesh’s economic development by fostering entrepreneurship, driving sustainable technology innovation, and contributing to economic growth, employment generation, poverty alleviation, and social stability. According to the 2019 manufacturing survey by the Bangladesh Bureau of Statistics (BBS), MSMEs represent 93.81 per cent of industrial output and employ over 32.85 per cent of the workforce. In the fiscal year 2022-23, the sector contributed 38.51 per cent to value addition and 24.45 per cent to GDP. Within this sector, youth-led MSMEs emerge as a transformative force, driving innovation and entrepreneurship across various industries.

DEMOGRAPHIC DIVIDEND AND LABOUR FORCE: Bangladesh is currently reaping significant demographic dividends from its youthful population eager for economic opportunities. According to the BBS Labor Force Survey report 2023, youths constitute about 26.5 per cent of the population. The youth labor force, aged 15-29, comprises 26.76 million individuals, or 36.44 per cent of the total labor force, with 13.60 million males and 13.16 million females. Notably, 8.26 million youths (18.9 per cent) are not engaged in Education, Employment, or Training (NEET), including 3.17 million males (15.4 per cent) and 5.10 million females (22.1 per cent). To enhance employability in the MSME sector, it is vital to provide education and training that fosters young entrepreneurs who can drive job creation and sustainable economic development. MSMEs generally require lower startup capital and can quickly adapt to market changes. By improving access to financing and offering mentorship and training programs, both government and private sectors can promote youth entrepreneurship.

CONFRONTING DEMOGRAPHIC CHALLENGES WITH YOUTH-LED MSMES: Young entrepreneurs face significant obstacles despite their potential. Youth-led MSMEs are vital for job creation, innovation, and economic diversification, thus unlocking opportunities for sustainable development.

CREATING EMPLOYMENT OPPORTUNITIES: Youth-led SMEs can significantly reduce unemployment and underemployment among young people. In Bangladesh, the youth unemployment rate is around 12 per cent, surpassing the overall unemployment rate and highlighting the need for innovative solutions to engage this demographic. A World Bank Report (2023) indicates that formal SMEs contribute up to 40 per cent of GDP in emerging economies, and estimates suggest that 600 million jobs will be required globally by 2030. In emerging markets, SMEs are responsible for creating 70 per cent of formal jobs.

DRIVING INNOVATION AND COMPETITIVENESS: Young entrepreneurs are vital for innovation across various sectors. Their fresh ideas and technological adaptability drive entrepreneurial initiatives in Bangladesh, particularly in technology, agriculture, and sustainable development. According to the Global Entrepreneurship Monitor (GEM), 35 per cent of young entrepreneurs in South Asia introduce new products or services, compared to 25 per cent of their older counterparts. This trend is visible in Bangladesh, where young entrepreneurs have transformed the market with e-commerce platforms like Daraz and AjkerDeal, creating numerous job opportunities. Furthermore, 45 per cent of youth-led SMEs in Bangladesh have adopted digital platforms for business, surpassing the 30 per cent adoption rate among older entrepreneurs. This digital shift has spurred innovation in mobile financial services (e.g., bKash), ride-sharing apps (e.g., Pathao), and digital healthcare solutions, such as Doktorola, which connects patients with doctors in rural areas.

FOSTERING ECONOMIC GROWTH AND PROMOTING SOCIAL INCLUSION: Young entrepreneurs are committed to sustainable and socially responsible practices, with 30 per cent of youth-led SMEs in Bangladesh focusing on sustainable development per the United Nations Development Programme (UNDP). These businesses tackle environmental issues while creating jobs. For instance, initiatives producing biodegradable products, like bamboo packaging, help reduce plastic waste. The energy and enthusiasm of young people can drive business growth and contribute significantly to Bangladesh’s GDP, enhancing productivity and competitiveness. Additionally, youth-led SMEs can foster a supportive network among young entrepreneurs and promote social inclusion by creating opportunities for marginalized groups, including women, minorities, and people with disabilities.

SUPPORTING STRATEGIES FOR THE SUSTAINABLE YOUTH-LED MSMES; The BBS survey indicates that 2.46 million individuals aged 15 and older are unemployed, with youth unemployment in Bangladesh exceeding the national average. This highlights the need for focused strategies to foster youth entrepreneurship. To harness the demographic dividend through transformative youth-led SMEs, collaboration among government, the private sector, and civil society is essential. Young entrepreneurs frequently face challenges in securing finance, which limits their ability to start and expand their businesses. According to World Bank Global Findex data from 2021, 47 per cent of individuals over 15 in Bangladesh are excluded from the formal financial system, reinforcing the need for loans, grants, and other financial support. The educational system often falls short in equipping young people with essential entrepreneurial skills, while the regulatory environment complicates the process of starting and running a business. Additionally, many youth-led SMEs lack the mentorship needed to navigate the business landscape, highlighting the importance of implementing mentorship programs to provide vital skills and knowledge.

Facilitating access to domestic and international markets allows youth entrepreneurs to sell products and services, generate revenue, and adapt to market trends and customer preferences. By exploring diverse market segments, youth-led MSMEs can diversify their income and enhance resilience against economic fluctuations.

To fully leverage the potential of youth-led MSMEs, it is important to address the varied challenges young entrepreneurs face across socio-economic backgrounds. For example, rural youth encounter more significant barriers in accessing technology and financial resources than their urban peers, which can impede their entrepreneurial efforts. Tailored solutions, such as specialised financial products and comprehensive digital literacy programs, can help bridge this gap. Additionally, examining global best practices, like Kenya’s successful youth entrepreneurship programmes that combine mentorship and funding, can offer valuable insights. By incorporating these diverse experiences and proven strategies, stakeholders can create an inclusive ecosystem that empowers all young entrepreneurs, thereby maximising their role in driving sustainable economic growth in Bangladesh.

Dr. Md. Abdul Latif, (PhD in Development Policy) is Additional Director, Bangladesh Institute of Governance and Management (BIGM)

abdul.latif@bigm.edu.bd