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Section: A INTRODUCTION

Now-a-days there are a lot of Small Business firms are operating in varity of fields.

We get our daily necessaries from the grocery shops. One takes food from a

restaurant or from a first food shop. Some shops are selling cloths, books,

electronics etc. Hair cutting saloon, laundry, automobile and electronic mechanic,

travel agent all of them are serving us in different ways. A doctor, engineer or a

lawyer give us different consultation services. These types of enterprises fall under

Small Businesses. These businesses face a lot of problems.

OBJECTIVE OF THE STUDY

The main objective of the report is to gather knowledge about the Small business

and find out the problems of them. We also try to adjust with the gap to be

competent at the modern job market.

The areas on which we will try to give emphasis are:

The main objective of this study is to determine the problems faced by

Small Business in Bangladesh.

Also, the key Constraints that influence business’s decision &

establishment of Small enterprises.

Then, based on the Small organization survey, recommending strategies to

improve the overall conditions of Small Business.

Justify the present supportive facilities, which are scarce to the Small

business.

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METHODOLOGY

Type of Research:

In this study, only exploratory research was conducted. Exploratory research was

undertaken on Small Business, to identify some of the Problems of Small Business

organization in Bangladesh.

Sources of Information:

Primary data:

We have collected primary information by interviewing owners of the business,

observing various organizational procedures, structures, and finally discussing

without any interruptions to their daily activities in the Small Businesses.

Sample size:

5 Small Enterprises are used to collect data as sample.

Data analysis:

For analyzing collected data the following statistical tools are used.

1) Frequency distribution

2) Bar chart

3) Table/Chart

4) Others.

Secondary Data:

We have used secondary data from the following sources:

1) Books

2) Journal

3) Internet

4) Statistical Survey

5) Newspapers etc.

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Limitations of the study

We have tried our best to collect the maximum information from the internet and some Small Businesses in Bangladesh but we faced some problems:

Enterprises didn't provide all necessary information for their business secrecy

Collecting data and preparing report is very expensive Times are not sufficient for preparing a very good report

As a result information presented on the report might not reflect the utmost entire reality. Few data, which are gathered from secondary sources, could not match with present situation, because there was no annual report from the company.

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Literature Review In manufacturing sector, “small industry means an industry in which the value/

replacement cost of durable resources other than land and factory buildings is

between 15 million and 100 million taka.”

In non-manufacturing sector, “small industry means an industry in which fewer

than 25 workers work.”(Industrial policy 2006).

In Bangladesh small businesses are facing a lot of problems. One of the most

recent studies (Sarder, J. 2001) based on a small sample of 19 small enterprises

identified the major difficulties faced by them: “lack of modern technology, lack of

adequate investments, irregular/inadequate supply of power, high rate of interest

on bank loans, inadequate availability of raw materials, absence of clear-cut

government policies, fierce competition, lack of skilled technicians and workers,

lack of research and development facilities.”A.R. Khan stated that the following

problems are faced by small business: raw materials, finance, marketing, under-

utilization of capital, technological obsolescence, inadequate and irregular supply

of raw materials, lack of organized market channel, imperfect knowledge of market

conditions, unorganized nature of operations, constraints of infrastructure facilities

etc.”

There has emerged a greater interest in understanding firms’ access to finance and

the financing of small scale industries (SSIs) in particular. Various studies have

indicated that one of the major obstacles for the formation and development of SSI

is related with the SSI’s access to financing.

“The industrial units belonging to the SSI sector, many of which are having

liquidity problems, are finding it difficult to possess the equity needed even to run

the day-to-day business. Commercial lenders, on the other hand, having experience

- and are still battling with – the effects of "non-performing loans", are cautious in

providing loans particularly to the SSIs. Therefore, in Bangladesh, the SSIs face

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difficulties having access to financial facilities and typically rely on their own

savings and loans from friends and relatives, especially during the start-up phase.

The issue of financing the SSIs is probably the most talked about one, but

compared to the demand, very less has so far been done in this area. ”

(Jesmin,Rubayet 2009).

Some of the SSI’s weaknesses are pointed out, for instance: “1. Due to difficult access to financing, a great part of the SSIs are engaged with activities which are characterized by higher labor intensity than invested capital and, thus, leading to sub-optimal use of resources. 2. A substantial part of the entrepreneurs do not have sufficient marketing, financial, accounting and legal knowledge, which hinders smooth-running of their business and reduces the efficiency of the enterprises. 3. Low access level and disregard of the real needs for information and consultation. 4. Underestimating of the quality requirements and lack of knowledge on standard specifications. 5. Some entrepreneurs are not well acquainted with the current effective international agreements and requirements.” (ASBBS Annual Conference: Las Vegas February 2009 Proceedings of ASBBS Volume 16 Number 1).

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Section B: Major Problems Faced by Small Businesses in Bangladesh

The ease of doing business in Bangladesh is not getting easier. The country has

taken a big 18 place drop in the recently published Doing Business, 2008 survey;

which ranked the country in the 107th position out of 178. The problems of

Bangladeshi Small businesses are described below:

1. Trade License: Small enterprises are required to procure trade license from local

government bodies by paying statutory fees. The process involves unnecessary

delays, harassment and side payments. The procedure needs to be simplified and

the issuance of the license made automatic subject to payment of requisite fees and

declaration by the investor that the proposed investment is in conformity with the

rules and regulations and zoning restrictions of the local government authority.

2. Registration under Factories Act: According to the Factories Act 1965, all

manufacturing units employing 10 or more workers are required to be registered

with the office of the Chief Inspector of Factories and Establishments. The job of

the Factory Inspector is to oversee the working condition and safety measures in

the factory. In practice, the regulation has proved to be a major source of delay,

harassment and unofficial payments for the investors particularly for those in the

Small businesses as the existing regulations do not differentiate between different

size categories with respect to safety and working conditions requirements.

3. Clearance from the Department of Environment: Small businesses are also

required to obtain a certificate from the Department of Environment in respect of

proper arrangement for anti pollution and safety measures. In this respect

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organization has to provide bribe money and maintain a lot of procedures. This is a

problem for Small businesses.

4. Registration with Sponsoring Agency: Registration with sponsoring agencies

such as the Board of Investment (BOI) or Bangladesh Export Processing Zone

Authority (BEPZA) is voluntary unless a Small enterprise wants to avail itself of

government incentives. To keep track of private investment in various sub-sectors,

it would be useful to make registration with the sponsoring agency mandatory.

However, to relieve the investors of possible hassles, registration procedure should

be simplified requiring minimum information to be provided by the investor, and

registration should not be held up until the proof of investment has been produced

as the current practice appears to be.

5. Contract Enforcement and Resolution: This is a constraint, which is faced by

small business firms. Inadequacy in the system for contract enforcement and

resolution arises from archaic legal system where procedure of adjudication is long

drawn out and cumbersome and the system is corrupt. Small enterprises with low

sustaining power often lose out in the long drawn out court battle.

6. Project Preparation and Evaluation: The first problem Small enterprises face

in seeking institutional finance is with regard to preparation of the project proposal.

In spite of directives from the central bank to follow standardized procedure, the

loan application process has still remained lengthy and cumbersome. The

entrepreneur often lacks the ability to formulate a proper project proposal. Even

when he prepares the proposal drawing on outside expert services, there is no

guarantee that the proposal will be evaluated properly as the financial institutions

themselves lack adequate capability for proper project evaluation.

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7. Bureaucracy and Corruption: Because of lack of proper autonomy and

accountability the public sector financial institutions are beset with inflexibility,

inefficiency, political interventions and corruption. Since the performance of the

bank officials is not properly evaluated they lack the incentive to bring a large

number of suitable borrowers, particularly those in the Small business sector,

within the fold of institutional financing. They adopt a passive and inflexible

attitude towards the borrowers either to avoid the risk of making an inappropriate

lending or to force the borrower to make side payments for more favorable

handling of the loan application.

8. Introducing new product or idea: There is always a risk involved in introducing

a new idea or product. In case of a radical innovation, market reaction and

consumer acceptability need to be tested. It is therefore, preferable to introduce the

product through a small firm, which ensures less risk factor on investment.

9. Management problem: Effective and efficient management is very important

for the smooth running of any kind of business. A new businessperson often has

the knowledge and skill to produce a good but will lack the necessary kills of

planning organizing, staffing, directing and controlling. Yet the small business

owner is often forced to become a generalist in management since he or she can’t

afford to employ a specialized person having necessary managerial skills. Also

they do not give the subordinates enough responsibility to manage.

10. Lack of coordination: Another disadvantage is the lack of coordination

between production and marketing. That is the failure to balance and coordinate

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these to critical functions. It is important for small business to keep judicious

balance among:

1. Having too few products so that the orders of potential customers have to be

turned down.

2. Having too big inventory as to bear too much inventorying and maintenance

cost.

3. Diversifying too fast. The advantage of diversification and the advantages of

product specialization should be balanced.

11. Poor access to credit: This is one factor that has been continued to be pointed

out as one of the major reason that is holding the local entrepreneurs back. It’s a

nightmare for a fresh-blood to get access to credit. There are 48 commercial banks

in Bangladesh; most of them target the urban market. The private players are

uninterested to move to the rural settings. But fortunately this is changing, due to

the Bangladesh Bank regulations and strong remittance growth from the migrant

workers these banks are finding the opportunity in this market and making a move

for rural expansion. But the access to credit is not getting easier. The banks are not

interested in providing credit to the small investors because of collateral issues and

the high cost involved in processing the loans. The small investors also lack proper

knowledge of how to access the financial institutions.

12. Quality of raw-materials: The material used to make a product lacks consistent

quality. The Small Businesses of Bangladesh have to go miles to achieve the

structured type of business that we find common in the developed world. Modern

quality techniques found are wanted in the Small manufacturing sectors of the

country. But as the businesses get more sophisticated they will need quality

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materials. As the recent quality scare in China proves business has lot more to lose

(e.g. quick execution) than their business.

13. Shortage of working capital: Shortage of working capital is the most

predominant limitation of small business. For this limitation, they cannot take the

advantage of economies of scale. They cannot take the advantage of discounts

given for bulk purchases. This leads to the inability to cope up with their larger

competitors in new facilities, equipment, tools, and methods.

14. Inadequate infrastructure facilities (power, water & gas): Infrastructure is

always a big headache for the urban and rural businesses. To fuel her ambition of

maintaining a growth rate of 7%, Bangladesh will need to add 2000 MW additional

energy each year. In 2010 the peak demand for electricity stood at 5500 MW

whereas generation was stagnated at 4500 MW. The result is service disruptions

and blackouts on almost every single day of the year. At 147 KWH Bangladesh has

one of the lowest per capita electricity consumption in the South-East Asia. Only

Nepal has lower consumption than Bangladesh. Water and gas is also in the same

poor condition. This has caused the businesses to look for alternative and back-up

services to support their businesses which in turn increase their operating cost

significantly. With rising fuel cost the expense is putting real dent in their profit

figures. The service disruption due to these shortages also causes severe problems

in Small Businesses.

15. Lack of efficient distribution channels: Bangladesh has one of the flattest land

structures in the world. The lack of obstacles (hills, desert etc) and presence of

cheaper transportation option (waterway) makes the country any supply channel

manager’s dream. But unfortunately the real picture is somewhat different .The

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Small Businesses lose near 40% of the perishable items due to lack of efficient

distribution channel. Lack of supply chain management knowledge, a weak

transportation system, and corrupt road authorities are some factors that contribute

to make the system inefficient.

16. Imperfect market: Market imperfection bleeds the businesses specially the

small players the most. Dominance of the middlemen in the value chain often cost

price distortion. It is a common scenario for the product to be sold at a significant

premium while the producers take on a huge loss. Lack of information and the

control exercised by these forces cause several problem for the local Small

producers.

17. Lack of governance: In a world bank online debate a commentator

said, “Corporate governance is not only relevant but essential for low-income

countries. The problem is not the stringency of rules but of the governors

themselves”. Governance is a serious issue with Bangladesh from the very

beginning. Poor governance is one of the key points what makes the Small firm

weak. The existence of nepotism in the business circle is also something which

makes a Small firm weak. It is a common trend among the business community to

fill up the existing positions within the firm with their relatives who may not be

suitable for the post. By separating ownership from management businesses can

create a better and effective venture.

18. Tax structure: The tax structure of Bangladesh offers little intensive for a

business. According to the JETRO survey Bangladesh holds the second highest

corporate tax rate among the Asian countries (even after the government has cut

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the rate to 37.5%). Source: JETRO (2007). This Tax structure is not favorable for

our Small Businesses.

19. Lack of connectivity: The world has moved on to connect itself to the World

Wide Web whereas Bangladesh is lagging far behind. Across the world innovative

business are emerging using a clicks and mortar business model. They are

leveraging the full potential of the World Wide Web. As the access to high-speed

internet connection becoming cheaper by the day around the world the story is

quite different for Bangladesh. Businesses have to pay a handsome amount in fact

one of the world steepest fees to get access to the web. But the scenario is changing

in the consumer front. Consumers now have access to the web through their cell.

There is a huge opportunity to cater to the foreign customers by displaying the

product in the web. But the high-speed internet connectivity is yet to reach the

acceptable standard to the Small Business in Bangladesh.

20. Lack of proper business knowledge: Most of the entrepreneurs of Bangladesh

apply the traditional hit and miss approach with their businesses. They have little

institutional knowledge and have little access to training as very few organizations

offer quality facility. In absence of know-how relating to general accounting,

branding, taxation, law etc the businesses tend to miss the opportunity that the

regulatory environment offers. Internet can play a vital role here for knowledge

dissemination but the access to the net is not that easy for these Small Businesses.

21. Corruption: There is very little to add in this point since there is so much

uproar from every kind of media about how corrupt the country is. Corruption is

probably one of the biggest problems faced by the organizations. The recent drive

against corruption is encouraging but unfortunately this is focused around the

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urban centers whereas the rural corruption is still rampant. This is the threats for

our Small Businesses.

22. Poor law and order situation: Having a sound law and order situation help

flourish business. But the situation has deteriorated over the years.

23. Frequent policy changes: Policies formulated get changed with the

government. As there is serious antagonism between the main two parties, they

tend to undo the work done by their predecessors. This causes pain to the Small

business community as the high investment projects. Require serious policy

consideration and longer payback period and such changes can create havoc for the

project.

24. Political instability: According to a UNDP research strike has led to 3-4%

GDP losses during the 1990s.There are about 611 strikes during 1995 to 2002. This

creates immense burden on the Small business firms as the shops often get

vandalized during strike violence.

25. Natural Disasters: Sheer density of the country’s population- 2,639 people per

square mile- makes any natural disaster a crisis. Among the time magazine’s list of

top 10 natural disasters of 2010 Bangladesh is the only country to be featured

twice. These disasters disrupt supply chain, damage Small business and create

untold suffering for this business’s consumers.

26. Skilled labor: Bangladesh may be the land of cheap labor but they are also

unskilled. The training institutions are not sufficient to provide the quality labor

force the businesses need.

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As a result Small Businesses are suffering a lot regarding production, cost, and

effectiveness etc.

27. Inability to cope with growth: Sometimes, the factors that are advantageous to

small business turn in to serious disadvantage when it is time to grow. Growth

often requires the owner to give up certain authority.

28. Lack of effective selling techniques:

Small businesses usually don’t have the access to specialized person at marketing.

So, they lack in scientific market research, specialty advertising and personal

selling. As a result sales are comparatively lower than the larger

enterprises. Location of the head office and the accessibility does affect the sale to

certain degree.

30. Having a Local Market for the Commodity offered:

In certain form of business, operation in a larger market is not economically viable.

For instance, it will not be economical for a restaurant to sell its product to a large

market. Such scale of operation exceeding the local demand would cause

inefficient use of resources. Therefore, a small firm does better in a small scale.

31. Availability of Limited Market:

When the market is limited, small business is the best choice. In a monopolistic

competitive market there is little possibility to grab a substantial market share. In

such case, small business offers better returns.

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Study of five enterprises

We have collected information regarding problems from five selected small enterprises. These enterprises are-

a. Jayson Breeder Ltd. b. Azan foods limited c. Eastern Engineering Works d. Signet Press Ltd. e. M/S Badar Box Industries Ltd.

Jayson Breeder Ltd.

Address South Pahartali, Fatehbad, Hathazari, Chittagong.

Former Owner: Adhyapak Fatema Begum

Present Owner: Jayson pharmaceutical ltd.

Name of Respondent: Abdul Halim and others

No. of Employee: 51

Types of products a) 1-day-old chick b) poultry feeds

Amount of Investment: Tk.4 .40 cr.

It is renowned for Healthy broiler Chick and better production. For rearing the 1-

day-old chick this small business produces poultry feed.

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Part of Organization: 1. Production Area: In this step the organization buys the parent stock and

combines the male and female stock. The ratio of female and male chicken is 9:1.

The buying price of the parent stock (chicken) is tk.200-300. This organization

gets 170-180 eggs from per female chicken. Every female chicken lays eggs

perfect to produce chick up to 65 weeks. Production area is divided into two types:

Pullet house: 1-day-old GPs (Grand Parents) are bought and reared in this house

up to 24 weeks. After that the GPs are transferred into the laying house.

Laying house: In the laying house the GPs are reared for collecting eggs up to 65

weeks.

2. Feed mill: In this mill feed are produced through three steps. These steps are-

Broiler starter: The feed which are produced in this step are used for feeding 1 to

7-day-old chicks.

Broiler Grower: The feed which are produced in this step are used for 6- week-

old chicken.

Broiler Finishing: The feed which are produced in this step are used for 17 to 65-

week-old chicken.

Raw materials in feed mill:

Raw materials Raw materials Maize Rice polish Soybean meal Full fat Soybean Wheat Bran Salt

Soybean oil Breeder premix DL-methioniom L-lysino Antioxidant.

3. Hatchery: In the Hatchery the eggs are hatched for 21 days. There are two types

of machines here:

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Shedder machine: In this machine the eggs are kept for 18 days. Then the eggs are

transferred into the Hatcher machine.

Hatcher machine: In this machine the eggs are kept for 3 days. After that 1-day-

old chick are found.

Per week the organization can produce 50000 1-day-old chicks.

Problems of this Business:

Problems Lack of financial credit, Inadequate modern poultry equipment, Inadequate logistic support, Lack of adequate poultry rearing knowledge, Absence of government help and guidance etc. Absence of adequate marketing Knowledge Lack of modern communication facilities Inadequate infrastructure and logistic support Problem of getting reasonable ingredients Expensive poultry feed Winter Season Bird flue Incorrect calculation of nutritious elements of feed Ingredients of feed are affected by toxic elements Lack of goodown for feeds Grandparent problems may be seen in chicks

Diseases: Gambaro Ranighat Coccidiocis

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PROBABLE SUGGESTIONS TO OVERCOME:

These problems can be overcome if some steps are taken by the concerned

authority. The main objectives are to develop huge number of unskilled people into

semi skilled or skilled. There are probable steps suggested by the researchers by

the opinion taken from various poultry farmers and relevant authorities.

These are as follows:

I. Government initiatives: Government has to take major step likecreate

institutions for training poultry farmers and businessmen, increasing infrastructure

and financing.

II. To design Proper HRD planning for poultry farmers: Effective HR planning

and coordination is equally significant for the private and the public sector in

Bangladesh.

III. To arrange easy loan: Every organization like government, private financial

institutions, NGOs, and foreign investors should come up to give micro credit to

poultry sector.

IV. To employ professional trainer: To generate the admirable flow of skilled

human resources in poultry sector, professional trainer is mandatory for all.

V. To adapt appropriate Modern technology: A low-cost intensive or semi-

intensive poultry technology should be initiate d for the sake of developing skilled

human resource for the poultry industry.

VI. To arrange workshop, seminar, and live demonstration for relevant

Poultry workers : The relevant authority should arrange workshops, seminars,

conferences, and live demonstrations for imparting training to the farmers

regarding the latest knowledge of poultry and marketing.

VII. To develop security situation: The relevant authority should improve the

security situation for smooth supply of day old chicks, live birds movements,

poultry accessories and equipment movements all over the country.

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Azan foods limited

Raw materials: The raw materials which are used by this organization are- Wheat, Jute sack, and Plastic sack. Raw materials (Wheat) are bought from the following countries: a. Canada

b. Australia c. Brazil, d. Ukraine e. France

Sacks for packing are bought from local market. The amount of raw material consumption is 15 tons per day. Processing: In the processing step wheat are watered for some hours because wheat needs to be cleaned. And then wheat is processed through the machine. The processing structure is given below: Fig: Process of Wheat After processing the following percentage of products are found:

Name of the products

Percentage

Maida………… Ata…………… Suzy………….. Bushy…………

72% 02% 01% 25%

Address Agaru Mile, Hathazari, Chittagong. Name of the entrepreneur: Alhaz Nurul Alam chodhury.

Name of the respondent: Sala Uddin Babul

No. of employees: Permanent- 25

Temporary- 15

Products: 1. Ata, 2. Maida, 3. Suzy and 4. Bushy

Wheat Maida Ata Suzy Bushy

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Investment:Initial investment: tk. 15000000 Present Investment: tk. 50000000 Working capital: tk. 6000000 Equipment:Local machine No. of machine: 4 Customer: Followings are the customer of Azan foods ltd. 1. Hotel (for maida), 2. Bakery (for maida), 3. Fisheries (for bushy), 4. Dairy farm (for bushy), and 5. Grocery shop (for Suzy) Sales and selling price: Sales of products per day: 10-20 tons Selling price of Maida per kg.- tk.33 Selling price of Ata per kg. – tk.28 Selling price of Suzy per kg. - tk.29 Selling price of Bushy per kg. –tk. 24 Problems:

1. Poor investment because of lack of loan facility 2. Apathy of the government 3. Lack of raw materials 4. Lack of technical knowledge 5. Communication system is underdeveloped 6. Lack of fuel & electricity 7. Under developed capital credit 8. Complexity in obtaining credit 9. Non-favorable investment market 10.Shortage of skill managers 11.Financing procedure 12.Production price is high but selling price is low 13.Unrest labor union 14. Lack of Government policy and subsidy 15.Traditional technology used 16.Project permission is always delay by the authority 17.Ineffective capital plan and budget 18.Absence of the management audit 19.High income tax rate 20.High VAT rate etc.

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EASTERN ENGINEERING WORKS

Eastern engineering works Ltd. is a very old enterprise producing various

dimensional springs especially for motor engine and vehicles. It is situated in

Chittagong BSCIC area which initial investment was only five lac. Its production

process requires at least six stages to bring out final output. Basically its target

market is Bangladesh railway but also produces for local motor workshops and

other industrial machines. The enterprise produces two kinds of spring:

Name of the owner: Kazi Akram Uddin Ahmed

Address 68/ Nasirabad industrial area, Chittagong

Name of Respondent: Shimul Chandra Sutradhar

Year of establishment 1976

Types of Business Manufacturing

Number of production

stage

6 to 7 stages

Number of employee 50

Product Motor Spring

Raw materials Spring steel

Sources of raw materials India, China, Japan, South Korea

Machinery used 1. Hydrolic press 2. Hardening farness

3. Load testing

machine

4. tempering farness

5. cutter machine 6. Shaper

Customer Bangladesh railway and local motor workshops

Initial investment Five(5) lac

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Light spring (for local motor workshops)

Heavy Spring (Especially for Bangladesh railway spring)

Mr. Shimul Chandra Sutradhar has been working in EASTERN ENGINEERING

WORKS for 28 years. He acquired too many experience from the enterprise.

During the conversation with Mr. Shimul Chandra Sutradhar, he informed us about

some major problem regarding their business. We have aligned his opinion into

following problems:

1. Problem of Raw

Material

2. Employee Problem

3. Marketing Problem 4. Financial Problem

5. Competitors Problem 6. Machinery Problem

7. Power Problem

1. Problems of Raw Material: Cost of steel spring is increasing day by day. But

usually the customers are unwilling to bear the extra price for the finished spring.

That’s why the enterprise has to cut the price from its profit. Another problem

regarding the raw materials is supply shortage in the importing countries like India,

China, South Korea, and Japan. In that case the enterprise is unable to manufacture

though there is huge demand. Often the enterprise has to issue letter by informing

officially to Bangladesh Railway about the shortage of raw material and it unable

to provide is order in due time. Thus the enterprise has to leave very big

opportunities (order) because of this raw material shortage.

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2. Employee Problem: No one is perfect for any job. Organization need to reshape

an employee’s working capability in terms of its customized requirement. That’s

why training is badly needed. As like as other organization, EASTERN

ENGINEERING WORKS requires some training program for its employees. But

very often it is impossible to bear the training cost for its employees. As a result

manufacturing efficiency cannot be ensured 100%. Employee turnover is common

to all most all small business enterprises. The enterprise recruits for unskilled

labors but when they become experienced, they switch to other organization for

higher salary.

3. Marketing Problem: EASTERN ENGINEERING WORKS usually don’t have

the access to specialized person at marketing. So, it lacks in scientific market

research, specialty advertising and personal selling. As a result sales are

comparatively lower than the larger enterprises. Sometimes effective and

responsive marketing channel like Electronic media becomes quite impossible for

the enterprise. Thus, demand cannot be generated and communication with the

customer is not possible.

4. Financial Problem: Shortage of capital is the most predominant limitation for

EASTERN ENGINEERING WORKS. For this limitation, it cannot take the

advantage of economies of scale. It cannot take the advantage of discounts given

for bulk purchases. This leads to the inability to cope up with its larger competitors

in new facilities, equipment, tools, and methods. It collects money from Agrani

Bank, Agrabad corporate Branch. But for sanctioning the loan quickly, bribe is the

only medicine in this respect. Another problem is remitting money from

Bangladesh Railway. Speed money is required to get the payment from its bill.

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5. Competitive Problem: HOSSAIN SPRING WORKS situated at Nasirabad,

Chittagong and APA SPRING MILLS at Dhaka are the prime competitors for the

EASTERN ENGINEERING WORKS. Always it faces challenges from other

competitors including these two in terms of manufacturing cost. If any problem

arises in respect of tendering with other competitors, then the enterprise has to

depend on Bangladesh Steel Business Association for the settlement.

6. Machinery Problem: Nobody cannot ensure about technical aspects. Any time

breakdown can be occurred in any machines in the whole manufacturing process.

But unlike large organization EASTERN ENGINEERING WORKS cannot

maintain alternative machines in the production process. As a result, if any

machine breakdowns the next machines have to idle up to the repairing of the

previous machine. It has only one technician to repair the all production

machineries which is not satisfactory.

7. Power Problem: Every business needs some power supply and some other

public utility services. Electricity, Gas, Water, Telephone etc. are some

prerequisites for a business. In Bangladesh only the sufferer know how tough it is

to get those connections. You need to pay a handsome amount o bribes to an

invisible hand. In case of telephone you might have to wait for more than years to

get connected. All these hazards are hampering the Small Business sector in

Bangladesh. Most of the working time electricity remains unavailable. In that case

diesel operated generator are used. But ultimately production cost goes up which is

tough for small enterprises to be competitive in compare to other enterprises.

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SIGNET PRESS LTD.

Signet Press Ltd. is a well organized enterprise for printing and manufacturing

product packages since 1969. It is situated in BSCIC industrial area, Chittagong

which initial investment was only Tk.9,20,000/= but now its total capital becomes

Name of the owner: Md. Jasim Uddin Chowdhery and others

Address 69, Nasirabad industrial area , Chittagong

Name of Respondent: Rezaul Karim

Year of establishment 1969

Types of Business Printing and Packaging

Number of production

stage

5 stages

Number of employee 120

Product Product wrapping box

Raw materials 1. Plain sheet 2. Chemical (local

&imported)

3. Foil 4. Varnish glue (local)

Sources of raw materials Malaysia, Korea and Bangladesh

Machinery used 1. Heidelberg

machine

2. Printing machine

3. Polar board 4. Cutter machine

5. Shaper

Customer Unilever, Ispahani, GSK and United pharmaceutical

Ltd.

Initial investment (Tk) 9 lac 20 thousand

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Tk.1.5 crore. Initially Mr. Md. Jasim Uddin Chowdhury, Mr. M.N. Azad

Chowdhury & Mr. Robiul Hossain started their business to produce product

wrapping boxes but with the passage of time they expanded their bossiness by

initiating printing machineries. Now it is possible to produce product wrapping

boxes as well as printing on the surface of the boxes.

Mr. Rezaul Karim, a 50 years old evergreen person who has been working as a

Production manager of Signet Press Ltd. is a very experienced person. We have

made our discussion with him about the current problem facing by the

organization. We have identified the following problems:

1. Quality of raw-

materials

2. Access to finance

3. Inadequate power

supply

4. Political instability

5. Lack of skilled labor 6. Technology up-

gradation

1. Quality of raw materials: We found the problem for quality raw materials is

one of the major problems that the organization has been facing for long time,

identified by Mr. Rezaul Karim. According to him this is actually the basic

problem for all Small Business firm concerning product packages. He

personally suffers from very instable supply of quality plain sheet for his

production process. It is not possible for an owner to produce the plain sheet for

packages as well as producing packages and printing on it. He must depend on

somebody for plain sheet. Very often he doesn’t get the supply and there is

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nothing to do but stop the production and ultimately the organization suffers

from risk of loss.

2. Access to finance: Signet Press Ltd. encountered great difficulties while raising

fixed and working capital because of the reluctance of banks to provide loans.

Banks are shy to lend to it because of high processing and monitoring costs of

loans. The loan application forms for investment financing from banks are long,

tedious, and redundant. Since the removal of the interest rate subsidy without

the removal of interest band, financial institutions find little incentive to lend to

small enterprises. The organization finds it difficult to use non real estate assets

as collateral to obtain loans from the banks.

3. Inadequate power supply: Power supply is always a big headache for the

urban and rural businesses. To fuel her ambition of maintaining a growth rate of

7%, Bangladesh will need to add 2000 MW additional energy each year. In

2007 the peak demand for electricity stood at 4500 MW whereas generation

was stagnated at 3,717 MW. The result is service disruptions and blackouts on

almost every single day of the year. At 147 KWH Bangladesh has one of the

lowest per capita electricity consumption in the South-East Asia. Only Nepal

has lower consumption than Bangladesh. This statistics makes us understand

how the small businesses are running their manufacturing? This power shortage

has caused the businesses to look for alternative and back-up services to support

their businesses which in turn increase their operating cost significantly. With

rising fuel cost, the expense is accumulated from its profit figures. The service

disruption due to these shortages also causes severe problems.

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4. Political instability: Almost all the Small Business firms we visited more or

less identified political instability as an important obstacle to Small Business

development in Bangladesh. It is not possible for them to run the business in

this condition. According to a UNDP research strike has led to 3-4% GDP

losses during the 1990s.There are about 611 strikes during 1995 to 2002. This

creates immense burden on the business firms as the shops often get vandalized

during strike violence. In'Hartal' Signet Press Ltd. cannot deliver its shipment to

the customers. On the other hand its entire operation is hampered by these kinds

of strikes.

5. Lack of skilled labor: Mr. Rezaul Karim claimed that, his organization has

lack of skilled manpower. He said that, “Since it is impossible to import man

power from foreign country, we have to satisfy our existing man power by

providing training.” Recruiting experienced employees is costly which is

unaffordable for small business firms.

6. Technology up-gradation: Mr. Rezaul Karim informed us that there are 5

stages in the manufacturing process. Almost all the machineries were imported

from foreign countries before a long time ago with a very capital investment.

Always the technology is changing. The up-gradation of technology is very

much high costly and it is almost impossible for the organization to afford.

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M/S BADAR BOX INDUSTRIES LTD.

M/S BADAR BOX INDUSTRIES LTD. is a small business manufacturing

organization typically producing corrugated paper box in various dimension since

1987. Initially its primary investment was eighty seven lac and its heavy

machineries allocated major portion of its initial investment. Day by day, its

business gradually increases due to expanding our garment industries. Its major

Name of the owner: Golam Mostafa

Address BSCIC industrial area, Block-B, Nasirabad

Chittagong.

Name of Respondent: Md. Mofijur Rahman

Year of establishment 1987

Types of Business Manufacturing

Number of production

stage

7 stages

Number of employee 95

Product Corrugated Paper Box

Raw materials K (Kraft) liner

Sources of raw materials Korea, Thailand and Bangladesh

Machinery used 1. Corrugated

machine

2. Pasting machine

3. Cutter 4. Stretching

machine

Customer Garments industries

Initial investment (Tk) 87 lac

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clients are maximum garment companies located in Chittagong Export Processing

Zone (CEPZ). We have made an appointment with Mr. Md. Mofijur Rahman, sales

manager of the organization and learnt a lot about the obstacles of their business.

The problems of their business are as follows:

1. Insufficient power

supply 2. High completion

3. Scarce of raw material 4. Employee turnover 5. Marketing problem

1. Insufficient power supply: We have identified during our investigation that

most of the small businesses are not satisfied with the existing power supply

system provided by Power Development Board (PDB). Most of the heavy

machineries in M/S BADAR BOX INDUSTRIES LTD. are run by electric power.

But at the time of our investigation, we have seen that, there is no power supply by

PDB. But production cannot be stopped for this reason because many large

garment companies are waiting for their order which will be released from the

enterprise. In that case, the organization uses generator operated by natural gas

which is also unavailable during a specific hours in a day.

2. High completion: Today, lots of financially sound companies expand their sub-

unit business for corrugated paper box. It’s a big threat for small enterprises like

M/S BADAR BOX INDUSTRIES LTD. Recently KDS Group tries to expand its

business into manufacturing trim paper boxes by establishing solely trim paper box

factory in Baizid Industrial Area, Chittagong. So, like large organization, it will be

tough for M/S BADAR BOX INDUSTRIES LTD. to compete with those giants.

Moreover, it will impossible to achieve economies of scale like large organization

due to capital shortage.

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3. Scarce of raw material: The basic raw material for M/S BADAR BOX

INDUSTRIES LTD. is K (Kraft) liner which is basically imported from foreign

countries like Thailand & Korea. Like necessity goods, price of raw material also

increasing day by day. But at the same time price of the finished goods is not

increases in parallel. That’s why the enterprise has to sacrifice its profit which is a

big threat for future business expansion.

4. Employee turnover: M/S BADAR BOX INDUSTRIES LTD. is experienced

regarding employee turnover. It cannot keep its existing skilled labor due to poor

salary structure. As a result very often workers switch to another organization

where salary is better. The small businesses cannot offer highly standardize salary

due to financial constraints. Thus sometimes the firm runs by unskilled labor and

Operational Excellencies cannot be achieved ever.

5. Marketing problem: Like large organizations, M/S BADAR BOX

INDUSTRIES LTD. as a small business cannot use advertising and publicity. It’s

very expensive for enterprise to use electronic media (television advertisement)

and print media (newspaper). Thus new market cannot be generated and potential

customers are unknown to the offers of the business. On the other hand, market

research cannot be conducted by the firm to identify the best strategy for sale. So it

is unable to increase its market shares.

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Percentage of problem: our findings regarding various problems give

the following percentages of each problems on the basis of five small

businesses .

Recommendation

Here we are giving some suggestions that may be helpful to improve the Small

Business sector in Bangladesh.

1. As capital is the major problem for Small Business development in Bangladesh

special emphasis should be put here. Commercial banks should finance Small

Business by giving them loan in low interest and for long term.

2. NGOs are very active in this sector. There activity should be spending all over

the country.

3. Government should make definite plan to boost up this sector. Youth

development department should be more activate. Their fund needs to be increased

and rules should be more flexible.

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4. Special ministry can be made to coordinate all this.

5. Government can give some subsidies to boost up this sector.

6. Taxation rules should be more flexible for Small Business.

7. It should be assured that the Small Business firms will get sufficient raw

materials in lower cost.

8. Political and social stability should be maintained. Terrorism must be sustained

and keep under control.

9. Red-tapism must be abolished. Corrupted officials need to be punished and

replaced.

1o. It must be assured that the Small Business firms will get public utility service

connection without any delay and bribe.

11. A syndicate can be made to help the entrepreneurs and to support this sector.

Conclusion: William Shakespeare in Julius Caeser wrote “the fault, dear Brutus, is not in our

stars- but in ourselves.” The statement is allegorical for Bangladesh. Except for

natural calamities all the problems mentioned here are caused by our own fault.

This is also a thing of hope as the most of the problems are caused by man-made

reasons, they can be solved with proper persuasion. There have been improvements

in the sanctioning and other administrative procedures affecting SMEs; further

simplification, transparency, and accountability are necessary to promote SME

development. A wide array of constraints faced by SMEs has been briefly

discussed in this report. It is apparent that problems related to power and credit are

the two most significant ones. Legal barriers, poor law and order conditions, are

some of the other problems that have adverse affect on Small business.

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Selected References ASBBS Annual Conference: Las Vegas February 2009 Proceedings of ASBBS Volume 16 Number 1 ASBBS Annual Conference: Las Vegas February 2009 Ahmed, S. (2006). "Some Issues on SME finance in Bangladesh". The New

Nation, Dhaka Ahmed, M. U. (2004). "Reinventing small enterprises." The Independent, Dhaka Ahmed, M. U. (1999). "Small and Cottage Industries Development Policies in

Bangladesh: An Analysis of Effectiveness in the Context of Industrial Policy-1991." Bank Parikrama, Volume XXIV, No 1

Ahmed, M. U. (1987)."The Financing of Small Scale Industries: A Study of

Bangladesh and Japan." University Press Limited, Dhaka GOB 2006, The Industrial Policy, Ministry of Industries, Government of the People’s Republic of Bangladesh, Dhaka Ahmed Momtaz Uddin: Development of Small-scale Industries in Bangladesh in the New Millennium: Challenges and Opportunities, Asian Affairs, Vol. 21, No.1, Jan-March, 1999. Ahmed Momtaz Uddin et.al: Small and Medium-Scale Enterprises in Industrial Development Academic Publishers, Dhaka, 1992. Ahmed Momtaz Uddin: The Economics of Small-scale Industries Revisited, micro, Dhaka, 2003. Ahmed Momtaz Uddin: Globalisation and Competitiveness of Bangladesh’s Smallscale Industries ( SSIs): An Analysis of the Prospects and Challenges, in CPD/UPL published, Bangladesh facing the Challenges of Globalisation, IRBD, 2001

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New Generation of Women Entrepreneurs Achieving Business Success, http://www.nfwbo.org/Research/8-21-2001/8-21-2001.htm http://www.scribd.com/doc/9775117/Major-Problems-Faced-by-Businesses-in-Rural-and-Urban-Bangladesh

www.bangladeshbank.org.bd

www.bangladesh-bank.org http://www.state.gov/g/oes/rls/rm/2008/21357.htm/ http://www.findarticles.com/p/articles/mi_m2872/is_3_27/ai_77417200/(11/9/04 http://www.google.com.m…/download%3Ffile_id%3D11092/(11/9/04)