...SME Financing in Bangladesh: Problems and Prospects SME Financing in Bangladesh: Problems and Prospects Prepared for Arafat Rahman Assistant Professor Institute of Business Administration Jahangirnagar University Prepared by Tanjila Sharmin 201301029 Md. Mourshed Uddin 201303006 Naim Ahmad 201403020 Sayeed Ishtiaque Ahmed 201403027 Md. Sazzad Hossain 201403034 Course Participant BUS 501: Managerial Communication (Section-02) WMBA Program Institute of Business Administration Jahangirnagar University December 20, 2014 Letter of authorization November 23, 2014 Course Participant BUS 501: Managerial Communication The purpose of this report is to familiarize you with the basic techniques and principles associated with writing a formal business report so that you can build and enhance this specific written communication skill. This formal report will be coordinated with a formal presentation session on the topic of the report. At a minimum, your report should include information related to the following issues: Introduction to the Industry/Sector/Area – What is the industry/sector/Area? What is the background of the industry/sector/Area in Bangladesh? Who are the major participants? You may show how the industry/sector/area is contributing to the economic development of the country. In this case, you must use industry-related data for the past three years (at least). In case of export-oriented industries...
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...Introduction The Small and Medium scale Enterprise (SME) are recognized worldwide as engines of economic growth. The commonly perceived merits often emphasized for their promotion especially in the developing countries like Bangladesh include their relatively high labor intensity, dependence on indigenous skills and technology, contributions to entrepreneurship development and innovativeness and growth of industrial linkages. The case for fostering SME growth in Bangladesh is irrefutable as these industries offer bright prospects for creating large-scale employment and income earning opportunities at relatively low cost for the unemployed especially in the rural areas strengthening the efforts towards achieving high and sustained economic growth which are critically important prerequisites for triggering an exit from endemic poverty and socio-economic deprivation. These promotional arguments for the SMEs, while universally emphasized are often put forward by their ardent advocates in a small versus large context and thus arouse serious debates concerning their economic viability. Much of such controversies may, however breakdown if the intrinsic virtues specific to SMEs and unavailable to large-scale industries are correctly identified and carefully exploited. A combined interaction of the forces of product-mix, location factors, technological advantages and market advantages create opportunities for SMEs to grow and prosper at all levels of development which are often ignored...
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...OVERVIEW Small and medium enterprises (SMEs) occupy unique position in most of the countries especially in a developing country. They are a primary target for many countries desiring to stimulate economic growth and development. The SMEs sub-sector plays an increasingly dominant role in the technology assimilation and dissemination and in economic development in Bangladesh as well. In Bangladesh, SMEs playing a significant role for the development of our economy by creating employment opportunity and producing important alternative machines and machinery parts for saving huge foreign currency for our country. So as a part of our development strategy, we should intensify our efforts to develop this sector to grow industrial base and volume of foreign trade. As we know the in this age of globalization, it is impossible to stop the flow of foreign goods to any country. Only quality products can meet the challenges in global market. For meeting this situation SMEs need to upgrade their technological capabilities and production facilities in order to produce quality products at a competitive price. DEFINITION Small and medium enterprises or small and medium-sized enterprises (also: Small and Medium-sized Enterprises; acronym in the plural: SMEs; small and medium businesses or small and medium-sized businesses, acronym: SMBs; and variations thereof) are companies whose headcount or turnover falls below certain limits. Enterprises Fixed Capital Investment Employees Small ≤Tk...
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...CHAPTER ONE 1. BACKGROUND In recent years, particularly since the adoption of the economic reform programme in Nigeria in 1986, there has been a decisive switch of emphasis from the grandiose, capital intensive, large scale industrial project based on the philosophy of import substitution to small scale industries with immense potentials for developing domestic linkages for rapid, sustainable industrial development. Apart from their potential for ensuring a self reliant industrialization, in terms of ability to rely largely on local raw materials, small scale enterprises are also in a better position to boost employ raw materials, small and medium enterprise, are also in a better position to boost employment, guarantee a more even distribution of industrial development in the country, including the rural areas, and facilitate the growth of non-oil exports. In Nigeria, the definition of small and medium enterprises also varies from time to time and according to institutions, for instance, the Central Bank of Nigeria’s (CBN) monetary policy circular No:27 of 1988 define small scale enterprises (excluding general commerce) as enterprises in which total investment (including land and working capital) did not exceed #500,000 and or the annual turn-over did not exceed #5.0 million. Medium enterprise (excluding general commerce) as enterprises in which total investment and not exceed #1,000,0000 (1 million) and the annual turnover did not exceed #1.2 million. Small scale enterprises...
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...Women Entrepreneurs in SMEs: Bangladesh Perspective Sponsored by: SME Foundation Conducted by: MIDAS November 2009 Table of Contents Acronyms List of Tables and Figures Executive Summary Chapter 1.0 1.1 1.2 1.3 1.4 1.5 1.6 Chapter 2.0 2.1 2.1.1 2.1.2 2.1.3 2.1.4 2.1.5 2.1.6 2.2 2.3 2.4 2.5 2.5.1 2.5.2 2.6 3.0 4.0 4..1 4..2 5.0 5.1 5.2 5.3 5.4 6.0 6.1 6.2 6.3 6.4 6.4.1 6.5 6.6 6.7 6.7.1 6.7.2 7.0 7.1 Introduction Statement of the problem Significance of the study Objective of the study Theoretical perspective of the study Scope of the study Limitations of the study Study Methodology Primary Research Location of the survey Sample Size Support Service Providers Methods of Data Collection Techniques of Data Collection Techniques of Data Analysis Secondary Research Focus Group Discussion (FGD) Key Informant Meeting (KIM) and Preparation of Case Studies Planning Workshops (PW) Planning Workshop Dialogues in the 6 Divisional HQs Discussions at Planning Workshops National Dissemination Seminar (NDS) Literature Review Entrepreneurship Concept of Entrepreneurship: A theoretical discussion Entrepreneurship in Bangladesh Women Entrepreneurship in Bangladesh History of Women Entrepreneurship Development in Bangladesh Women Entrepreneurs of Bangladesh Women Entrepreneurship in Urban Areas Women Entrepreneurship in Rural Areas Small & Medium Enterprises (SMEs) Definition of SME Theories of SME SMEs in Bangladesh Promotion of SMEs for Sustainable Development Access to Finance...
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...analyse the contributions of entrepreneurship in the economic development through SME development in Nigeria. A total of 100 SMEs were randomly selected from a cross section of a population of all SMEs spread around some states of Nigeria and covering virtually all forms of enterprise. Participants were selected through a simple random sampling. The responses to the questionnaires were complemented with personal interviews of some SMEs operators. The responses of the participants were analyzed using the statistical package for social sciences (SPSS), which generated the frequency distributions, means, standard deviations, chi-square statistics, analyses of variance, etc of the responses. The hypotheses of this research which were tested at 0.05 level of significance using chi-square statistics hinged on identifying the greatest problem which SMEs face in Nigeria, the identification and ranking of the top ten problems or challenges of SMEs in Nigeria and the relationship between the form and nature of the business enterprise and its sources of funding for its operations. The major findings of this study include the following: SMEs have played and continue to play significant roles in the growth, development and industrialization of many economies the world over. In the case of Nigeria, SMEs have performed below expectation due to a combination of problems which ranges from attitude and habits of SMEs themselves through environmental...
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...analyse the contributions of entrepreneurship in the economic development through SME development in Nigeria. A total of 100 SMEs were randomly selected from a cross section of a population of all SMEs spread around some states of Nigeria and covering virtually all forms of enterprise. Participants were selected through a simple random sampling. The responses to the questionnaires were complemented with personal interviews of some SMEs operators. The responses of the participants were analyzed using the statistical package for social sciences (SPSS), which generated the frequency distributions, means, standard deviations, chi-square statistics, analyses of variance, etc of the responses. The hypotheses of this research which were tested at 0.05 level of significance using chi-square statistics hinged on identifying the greatest problem which SMEs face in Nigeria, the identification and ranking of the top ten problems or challenges of SMEs in Nigeria and the relationship between the form and nature of the business enterprise and its sources of funding for its operations. The major findings of this study include the following: SMEs have played and continue to play significant roles in the growth, development and industrialization of many economies the world over. In the case of Nigeria, SMEs have performed below expectation due to a combination of problems which ranges from attitude and habits of SMEs themselves through environmental...
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...SUMMARY Overall, the SME FDI is currently an extremely valuable initiative. Through appropriate and careful analysis of the data, public policy can be directed yet more efficiently to further improve competitive advantage of Canada's SMEs. In particular, the baseline survey associated with the SME FDI is an extraordinarily valuable research undertaking. It provides the potential to assess directly the extent to which financing gaps might occur in the capital markets on which SMEs rely. This is an important issue in practical terms, in terms of the role of public policy, and in terms of economic and finance theory. The SME FDI baseline survey data provides, for the first time internationally, a means of empirically testing Nobel prize-winning ideas related to information asymmetry and capital rationing. The data provides a means of providing yet better guidance for public policy with respect to addressing potential capital market imperfections that might constrain growth and economic development of SMEs. As designed, the research initiative can and will provide valuable information about these issues. In summary, the baseline survey undertaken as part of the SME FDI is a potentially invaluable resource with respect to the design, targeting, implementation, and follow-up assessment of public policy approaches to nurturing SME growth and viability. The outcomes of this research process could help Industry Canada and its partners to provide Canadian SMEs with substantial competitive...
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...Summer Internship Project Report On Evaluation of Small & Medium Enterprises (SME) Business Presented to Mr.Deepak Pothan (Vice President – Institutional Banking Group, Development Bank of Singapore (DBS), Bangalore) Presented by Aditya Shetty Roll No. 258 MBA-Core Div C NMIMS 03-June-2011 Preface This project report has been prepared as part of the Summer Internship Program of the MBA-Core course curriculum at Narsee Monjee Institute of Management Studies (NMIMS), Mumbai. This is in partial fulfilment of the requirements of the MBA programme. The report focuses on the Small and Medium Enterprises (SME) segment of borrowers. SME market is the growing and upcoming sector in the banking industry. This encourages entrepreneurs to develop their company from small sized to the future big corporate. The basic aim of the project is an understanding of the SME market in Bangalore and designing a strategy for Development Bank of Singapore (DBS) to enter this segment. This subject was chosen since the subject is a new& developing field for the foreign banks and private banks. SME products help in understanding the various funding & non funding based lending mechanisms. This project will help me understand various means of understanding the various lending mechanisms used by banks. This understanding of SME business will help in the future to know more about the banking industry. Bangalore Aditya Shetty 03-June-2011 Acknowledgement ...
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...Enterprises (SMEs) play a pivotal role in poverty alleviation and rapid industrialization of the developing countries like Bangladesh. In this paper we tried to appraise the Problems and Prospects of SMEs in Bangladesh. We observed from the research that non availability of adequate credit, complex loan granting procedure, inadequate infrastructure facilities, problems of collateral requirements, paucity of working capital, non availability of skilled work force, poor salary structure, lack of coordination among SME related organizations, lack of appropriate marketing strategies etc. are the major hindrances to the development of the SMEs in Bangladesh. In order to overcome the problems researchers have tried to provide some recommendations for the developments of SMEs in Bangladesh based on sound reasoning. Background of the Assignment Small and Medium Enterprises (SMEs) act as a vital player for the economic growth, poverty alleviation and rapid industrialization of the developing countries like Bangladesh. SMEs are significant in underlying country’s economic growth, employment generation and accelerated industrialization. Government of Bangladesh has highlighted the importance of SME in the Industrial Policy-2005. SMEs have been identified by the Ministry of Industries as a ‘Thrust sector’. As the SME sector is labor intensive, it can create more employment opportunities. For this reason government of Bangladesh has recognized SME as a poverty alleviation tool. SMEs also foster...
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...Chapter: 1 SME Financing in Bangladesh We have come across many definitions of SMEs in Bangladesh. According to the Industrial Policy document from the Ministry of Industries, a small enterprise is defined as a registered enterprise with less than 50 workers, excluding the cottage units, and with a fixed capital investment of less than BDT 100 million. A medium enterprise is defined as a registered enterprise with between 50 and 99 workers, and/or with a fixed capital investment between BDT 100 million and BDT 300 million. The PCBs (Private Commercial Banks) seem to have various definitions based on loan components. The small-scale segment is in general defined as enterprises with a loan component between BDT 300,000 and BDT 10 million (between USD 5,500 and USD 185,000). Medium companies are said to have a loan component between BDT 10 million and BDT 100 million (between USD 185,000 and USD 1.85 million). Under yet another definition the World Bank estimates that Bangladesh has approximately 27,000 medium-scaled enterprises (here defined by the Government of Bangladesh as registered enterprises with assets larger than USD 600,000 equivalent) and 150,000 small-scale enterprises (registered enterprises with assets of less than USD 600,000 equivalent). The small and medium scale enterprises (SMEs) are mainly found within the industry and services sector. In Bangladesh, the SMEs account for about 45 percent of manufacturing value addition, 80 percent of industrial employment...
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...which are formed to offer credit facilities for household consumers and/or industries through commercial papers, mortgages, leasing of properties, etc. The primary function of finance companies is to make loans to individuals and corporations. . Financial companies do not offer deposit services; rather they source their funds through borrowing from banks and other money market sources by issuing commercial papers and bonds. Due to its dependence on borrowed money for sourcing, finance companies hold more equity than banks for the purpose of signaling solvency to potential creditors. Finance companies offer loans of small denomination to consumers and since they have quite high credit rating, they are able to borrow at a low interest rate from other lending institutions and therefore are able to offer their loans at reasonable rates. They are different from banks in that they provide loans and credit facilities to consumers and firms who otherwise have a non-sufficient credit record to secure loans from banks; however the interest rate they charge is higher than banks. The emergence of finance companies was mainly due to bank’s refusal to lend out small loans to firms and consumers. Finance companies has since then evolved to provide both sales-finance and consumer loan services. Sales-finance companies mainly operate by purchasing unpaid customer accounts at a discount from sales firms, and collecting payments due from the customers on a periodic basis therefore providing...
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...Report On Contribution of Banks on SME Sector in Bangladesh 1 LETTER OF TRANSMITTAL 2 ACKNOWLEDGEMENT 3 Table of contents No: Page: Chapter One Introduction 1.1 Introduction 1 1.2 Background of the study 2 1.3 Problem statement 3 1.4 Objectives of the study 3 1.5 Scope of the study 4 Chapter Two Methodology 2.1 Data requirement 5 2.2 Study area 6 2.3 Sample size selection 6 2.4 Questionnaire development 7 2.5 Literature review 8 2.6 Small enterprise 10 2.7 Medium enterprise 10 2.8 SME financing by Banks in Bangladesh 11 Chapter Three Results 3.1 Contribution of SMEs in the economy 13 3.2 Current status of SME financing by Bangladesh Bank 14 4 3.3 Loan documents needed for SME financing by banks 14 3.4 About the sample banks 15 3.5 Portfolio size of different banks in SME sector 17 3.6 Target given by Bangladesh Bank 19 3.7 Survey analysis 24 3.8 Findings 27 Chapter Four 29 Limitation Chapter Five 30 Conclusions and recommendation Appended Parts Data collection instruments Details of entrepreneurs Bibliography List of Tables 3.1 Portfolio size of Different Banks in SME sector 17 3.2 Distribution of entrepreneurs whether or not they take bank loan 24 to operate their SME business. 3.3 Distribution of entrepreneurs...
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...Institutional Financing of SME in Bangladesh [pic] [pic] TERM PAPER ON Institutional Financing of SME in Bangladesh Submitted By: ID- Program- BBA Premier University, Chittagong Submitted in partial fulfillment of the requirements for the Bachelor of Business Administration. Submitted To: Ms. Nilufar Sultana Lecturer, Dept. of Finance & Banking, Faculty of Business Studies, Premier University, Chittagong. DATE OF SUBMISSION: /09/2012 Letter of Transmittal Date: To Ms. Nilufar Sultana Faculty of Business Studies Premier University, Chittagong Sub: Letter of Transmitter on Term Paper Dear Madam, This is my pleasure to submit my term paper report on “Institutional financing of SME in Bangladesh” which I was assigned. It was a great opportunity for me to acquire knowledge and experience in respect of the functions, procedures and operational activity, other than my topic of study. I have concentrated my best efforts to achieve the objectives of the assignment study and hope my endeavor will serve the purpose. However, I will always be ready to provide any further clarification that you may require. Sincerely Yours, ID# Program: BBA Batch Number: 16 8th Semester Section: Major:...
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...institution’s view on financing opportunities for SME institutions. As a financial organization the report shed light on BSRS and its BCC/BASIS/ICT Incubator and its adjacent financing modules. From entrepreneur’s point of view a number of incubator listed firms were selected and their financing process has been introduced. This report exclusively focused its view toward ICT SMEs. The fact that ICT Incubator is only accessible to IT companies and the importance of ICT in Bangladesh economy growth has an implicit importance in this regard. The report took this issue further by listing the bars that remains in today’s financial market for an ICT SME. The report also contains critical analysis of the whole financing process and its pro/cons. The submitters took the liberty of comparing BSRS normal SME financing schemes and its past data with BSRS/BCC/ICT Incubator financing schemes. This report also showed the Requirements, Paper works, Validation process, Other payment options & Follow through of the whole financing process. Past data of BSRS financial investments and loan disbursements as well as data on participation in ICT incubator has also been included. Recent times have seen an encouraging up rise of women participation in SME institutions. This fact has not been ignored and an analysis with relevant data on women participation in BSRS and ICT Incubator scenario has been introduced. The investment process for SMEs has been presented with diagrams and charts. A relatively...
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