Presentation on

“Incentives and facilities for small and medium enterprises (SME) provided

by our government.”

Prepared by

“Brainstorming Group”

Overview SMEs have assumed special significance for poverty

reduction programs and potential contribution to the overall industrial and economic growth in Bangladesh. This report focuses on incentives and facilities for SME provided by our Government. We have tried our best to give an overview on

SME sector in Bangladesh Government Organizations’ activities for SME developmentBangladesh Small and Cottage Industries Corporation

(BSCIC). SME Foundation BASIC BankBangladesh BankBangladesh Krishi Bank These play important roles for implementing Government

policies by adopting strategies and programs efficiently for SME development. So we have made a study on these organizations to identify the activities and programs for SME development.

Definations of SMEs According to “Industrial Policy 2010” of

Bangladesh the definations of SME: Manufacturing enterprise:  Small enterprise: An enterprise would be treated as

small with capitalized costs excluding land and building, is between BDT 50 lacs to BDT 10 crores.The number of workers is between 25 and 99.

Medium enterprise: An enterprise would be treated as medium with capitalized costs excluding land and building, is between BDT 10 crores and BDT 30 crores.The number of workers is between 100 and 250.

  

Definations of SMEs Non-manufacturing activities: (such as

trading or other services)  Small enterprise: An enterprise would be

treated as small with capitalized costs excluding land and building, is between BDT 5 lacs and BDT 1 crore and it has less than 25 employees.

 Medium enterprise: An enterprise would be treated as medium with capitalized costs excluding land and building, is between BDT 1 crore and BDT 15 crore and it has maximum 100 employees.

Govt. policy under “Industrial Policy 2010” for SME Government will encourage SME

entrepreneurs through providing adequate loan and training programs to create strong position of SME.

SME will be re-financed continuously by BB through three re-financing funds.

Women entreprenuers will get priority for SME loan . 15% of total loan will be for them and the interest rate will be 10%.

ICT Industries will get priority for govt. assistance.

Institutional Arrangements for SME development

BSCIC has been the key public sector agency responsible for supporting SME promotion for a long time.

Bangladesh Bank,BASIC Bank,SME Foundation, Bangladesh Krishi Bank, Janata Bank etc.

The private sector efforts through participation of MIDAS and selected NGOs (especially GB, BRAC and Proshika) have been worked especially in SME promotion.

Government Organizations for SME developmentBangladesh Small and Cottage Industries

Corporation (BSCIC)SME FoundationBangladesh BankBASIC BankBangladesh Krishi Bank Others (Janata Bank, Agrani Bank, Rupali

Bank)

BSCIC provides assistance in all other matters relating to development and expansion of small and cottage industries (SCI).

Its major functions are as follows :Promotion and registration of small and cottage industries

Conducting advisory and industrial promotion services including training of entrepreneurs, skill development of artisans and craftsmen, creation of jobs for SCIs etc.

Construction. and development of industrial estates with necessary infrastructural facilities for SCIs.

Development of linkages between SCIs and large and medium sized industries.

Bangladesh Small and Cottage Industries Corporation( BSCIC)

Goals of BSCIC which are focusing on SME development

A. To assist private entrepreneurs for establishing new Small, Medium & Cottage Industries (SMCIs) unit upto 2015.

i) Total : 0.409 million unit ii) Small Industry : 0.086 million unit iii) Medium : 0.008 million unit

iv) Cottage Industry : 0.315 million unit

Goals of BSCIC which are focusing on SME developmentB. To create labour force employment facilities

through new Small, Medium & Cottage Industries (SMCIs).i) Total : 3.06 million

ii) Small Industry Sector : 1.54 millioniii) Medium : 0.52 millioniv) Cottage Industry Sector: 1 million

v) Percentage of new labour force employment (Total L/F 2005-2025: 3.80%) vi)Percentage of total labour force employment:

8.28%

Goals of BSCIC which are focusing on SME development

C. Contribution to GDP : 30% (Tk.1050 billion ) (To raise GDP in Small, Medium & Cottage Industries sector from 5% to 30%)

D. To raise daily income of employed poor labour force people in SMCIs sector from 1 US$ to 3 US$ through poverty alleviation programs/projects undertaken by BSCIC and through private sector investment.

Cumulative Small, Medium & Cottage Industry unit and employment will reach by 2025 (figure in million). Category of Industry Unit Employment

Small 0.171 2.915 Medium 0.013 0.863 Cottage 0.904 2.852 Total 1.088 6.630

The stretegy of BSCIC for implementing proper incentives and facilities for deveopment of SMEStrategy 1: Upgrade technological and

management capabilities of SMEs.Strategy 2: Develop SME’s entrepreneurs and

human resourcesStrategy 3: Enhance SMCI’s access to marketsStrategy 4: Strengthen financial support system

for SMCI’sStrategy 5: Foster an environment conducive for

business developmentStrategy 6: Develop micro-enterprises and

community enterprisesStrategy 7: Develop networking among SMCI’s

and clusters

The BSCIC provides services to the private sector entrepreneursPre investment counselingIndustrial information disseminationScouting for entrepreneursExtension servicesEntrepreneurship developmentProject appraisal (technical, financial, economic and

management)Feasibility studyCredit arrangementSanction of enterprisesSupervision of project implementationInfrastructure developmentManagement and skill development

The BSCIC provides services to the private sector entrepreneursProduct developmentDesign and prototype development and distributionRaw material arrangementDiagnostic studiesSub-contracting arrangementInnovative production process and technologyQuality controlMarket survey of productsMarketing (including export) arrangementLiterature on products and process from home and abroadResearch and developmentInter-organization co-ordination.

SME FOUNDATION Non-Trading organizationTo develop SME for employment creation and national

economic growthTo implement govt. SME policyPolicy advocacy and researchCredit wholesalling program (9% interest rate)Capacity building and skilled developmentTechnology development and uses Access to informationWomen entrepreneur developmentBusiness support servicesProduct quality development and quality certification

assistance

BASIC Bank limited and SMEState owned and specialized bank50% fund for SMEs financingMaximum loan for Small Enterprises 50

lacPrefer 25 SME sectors BASIC KALYANI for women entrepreneurCollateral free maximum loan 5 lac @

10% interest rateMaximum loan payment period 3 to 5

years

Bangladesh Krishi Bank and SMEProviding loan for SME to reduce proverty to implement vision

2021.Loan for women enterpreneur with simple conditions.Two types of loan (Project loan and Current capital or Cash

Credit)Small Enterprise Loan limit Service and trading 50 thousands to 50 lac Manufacturing 50 thousands to 1 croreMedium enterprise Loan limit Service and trading 50 lac to 10 crore Manufacturing 1 crore to 15 croreProject loan interest rate 12% and payment period = grace

period + 5 years.Current capital / Cash credit interest rate 12.5% and payment

period 1 year.

Bangladesh Bank and SME developmentSeparate SME and special programs

department Annual SME loan target for banks Priority for small and women

entreprenuerRegion and sector based financingTraining Three layer monitoring systemAvailable information for SME loan and

promotionOutsourcing for SME loan program

Bangladesh Bank and SME developmentMotivation for SME loan providingSpecific funds for women entrepreneurHelp desk for women entrepreneurLow interest rate for women

entrepreneur(Bank rate+5%)Collateral free loan upto 25 lacs for

women entrepreneurSME loan for ICT sectorHelp for increasing grace period

Key Issues and challenges faced by SMEs.Liberalization and Global competitionNew Emerging Technologies.Skill Development.Finance.Information.

RecommendationsIndigenous R&D capabilities should be developed

quickly.Most manufacturing processes are today

electronically controlled. Hence, adequate skill has to be developed for using and maintaining electronic components and control devices.

Designated financial institutions should not only be encouraged but also be helped to develop expertise in industrial financing, technology assessment and acquisition of relevant sectoral knowledge. 

Free information assistance will have to be provided to potential investors in the SME sector for developing project proposals.

RecommendationsBangladeshi workmen are unable to produce goods

from the standard specifications. This deficiency has to be removed quickly by establishing appropriate training and skill development facilities.

Selection, acquisition and application of the appropriate technology for production.

Compliance with Quality Assurance and environmental friendliness standards, through adoption of TQM, ISO 9000, ISO 14000, etc., and necessary training for practicing these.

Institutional facilities are needed for entrepreneurship development, including particularly capturing the high entrepreneurial ability of the women of Bangladesh.

ConclusionSuccess of SMEs development in Bangladesh

dependon following aspects:Tecnological developmentSkill developmentUp to date informationClose co-ordination between

entrepreneurs and government institutions.

Thanks for your co-operation

The End