Free Essay

Smes in Bd

In: Business and Management

Submitted By silve1990
Words 6439
Pages 26
ASSIGNMENT
Submitted to: Mohammad A. Arafat
Sr. Lecturer
SB, IUB.

Submitted by: Farzana Rubaya
Id: 1230580
MGT (405) Sec: 01

Introduction :
Small and medium-sized enterprises sometimes also called small and medium enterprises (SMEs) or small and medium-sized businesses (SMBs) are businesses whose personnel numbers fall below certain limits. These are the most common businesses found across most of the world’s economies. The World Bank Review on Small Business Activities establishes the commitment of the World Bank Group to the development of the small and medium enterprise (SME) sector as a core element in its strategy to foster economic growth, employment and poverty alleviation. In the context of Bangladesh, the development of Small and Medium Enterprises (SMEs) can be considered as a vital instrument for poverty alleviation and ensure the rapid industrialization. So we can say that the role of Small and Medium Enterprises (SMEs) is indispensable for overall economic development of a country particularly for developing countries like Bangladesh. It has drawn a lot of interest among policy makers, academics, businessmen and people in general. 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. As a result they will enhance the standard of living in rural areas.
SMEs (Around the world) :
Although the definition of what an SME is varies across nations, the most widely used measure is that of the European Union (EU). According to the European Union (2003) SMEs are defined as enterprises which have at most 250 employees and an annual turnover not exceeding 50 million Euros. Further there is the distinction of small enterprises — they have fewer than 50 staff members and less than 10 million Euros turnover — and micro-enterprises (less than 10 persons and 2 million Euros turnover).

According to the World Bank (2006), medium enterprises are defined as enterprises, which have at most 300 employees and an annual turnover not exceeding 15 million US dollars. Further, there is the distinction of small enterprises — they have fewer than 50 staff members and up to 3 million US dollars turnover — and micro-enterprises have up to 10 persons and $100,000 turnover.

In the UK, sections 382 and 465 of the Companies Act 2006 define a SME for the purpose of accounting requirements. According to this a small company is one that has a turnover of not more than £5.6 million, a balance sheet total of not more than £2.8 million and not more than 50 employees. A medium-sized company has a turnover of not more than £22.8 million, a balance sheet total of not more than £11.4 million and not more than 250 employees. It is worth noting that even within the UK this definition is not universally applied.

In the USA, the definition of small business is set by a government department called the Small Business Administration (SBA) Size Standards Office. The SBA uses the term “size standards” to indicate the largest a concern can be in order to still be considered a small business, and therefore able to benefit from small business targeted funding. The concern cannot be dominant in its field, on a national basis. It must also be independently owned and operated. Unlike the UK and the European Union, which have simple definitions applied to all industries, the US has chosen to set size standards for each individual NAICS coded industry. This variation is intended to reflect industry differences in a better way. The most common size standards are :

500 employees for most manufacturing and mining industries.
100 employees for wholesale trade industries.
$6 million of annual receipts for most retail and service industries.
$28.5 million of annual receipts for most general & heavy construction industries.
$12 million of receipts for all special trade contractors.
$0.75 million of receipts for most agricultural industries.

Canada defines a small business as one that has fewer than 100 employees (if the business is a goods-producing business) or fewer than 50 employees (if the business is a service-based business). A firm that has more employees than these cut-offs but fewer than 500 employees is classified as a medium-sized business.

In India the Small Scale Industries (SSIs) are industrial undertaking in which the investment in fixed assets in plant and machinery, whether held on ownership terms or on lease or by hire purchase does not exceed Rs. 10 million. The Small Scale Service and Business (Industry related) Enterprises (SSSBEs) are industry related service and business enterprises with investment in fixed assets, excluding land and building up to Ps. 1 million. (Ministry of trade and Industry, Government of India)

According to the SME bank of Pakistan, SME means an entity, ideally not a public limited company, which does not employ more than 205 persons (if it is manufacturing concern) and 50 persons (if it is trading/service concern) and also fulfils the following criteria of either ‘a’ and ‘c’ and ‘c’ or ‘b’ and ‘c’ as relevant; (a) A trading/service concern with total assets at cost excluding land and buildings up to Rs 50 million. (b) A manufacturing concern with total assets at excluding land and buildings up to Rs 100 million. (c) Any concern (trading, service or manufacturing) with net sales not exceeding Rs 300 million as per latest financial statements.

SMEs in the context of Bangladesh:
“Small industry means an industrial establishment or unit which is rum mainly by hired labor and not using mechanical motive power but does not normally employ more than 50 work and whose land, building and machinery does not exceed Tk.150, 00,000 in value in either case.” – E. Pakistan Small Industries Corporation Act of 1957.

But The central bank of Bangladseh has come up with a new definition for small and medium enterprises in line with the government's industrial policy of 2010. The new definition replaced the previous ones formulated in May 2008, incorporating microenterprise and cottage industries. Existing definition of SME is recommended by Better Business Forum and accepted as a uniform one by Ministry of Industry and Bangladesh Bank. The Government of Bangladesh has categorized SME into two broad classes : Manufacturing enterprise and Non Manufacturing activities. 1) Manufacturing enterprise : Manufacturing enterprises can be divided into two categories:

a. Small enterprise: an enterprise would be treated as small if, in current market prices, the replacement cost of plant, machinery and other parts/components, fixtures, support utility, and associated technical services by way of capitalized costs (of turn-key consultancy services, for example), etc, excluding land and building, were to up to Tk. 15 million. b. Medium enterprise: an enterprise would be treated as medium if, in current market prices, the replacement cost of plant, machinery and other parts/components, fixtures, support utility, and associated technical services by way of capitalized costs (of turn-key consultancy services, for example), etc, excluding land and building, were to up to Tk. 100 million.

2) Non-manufacturing activities (such as trading or other services): Non-manufacturing activities can be divided into two categories:

c. Small enterprise: an enterprise should be treated as small if it has less than 25 workers, in full-time equivalents. d. Medium enterprise: an enterprise should be treated as small if it has between 25 and 100 employees. According to Bangladesh Bureau of Statistics different enterprises are defined as; Enterprises | No. of employees | Micro | 0-9 | Small | 10-49 | Medium | 50-99 | Large | Above 99 |

There is great interest in small and medium enterprises (SMEs) as major tool of poverty reduction in Bangladesh. Government of Bangladesh formulated a comprehensive Industrial Policy by putting special emphasis for developing Small and Medium Enterprises (SMEs) as a thrust sector for balanced and sustainable industrial development in the country to help deal with the challenges of free market economy and globalization. With multilateral trade negotiations is often leading to improving market access and with developing countries also being a lot more willing than before to participate in globalization, rich country government and the aid agencies have apparently decided to focus on the SMEs as one important ingredient of private-sector development. Industrialization’s link to poverty reduction is through - charging-up the growth rate of the country, enhancement of the productivity of the worker(s) in employment, providing employment to the unemployed, expanding consumer spending and thus the confidence level by sharing lower costs from scale economies via lower prices. As a result SME in Bangladesh takes several strategies to grow itself & economy of this country. Such as Market development strategy, product development strategy, diversification strategy etc. The Government of Bangladesh constituted the taskforce to monitor and operate Small & Medium Scale Industries late in 2003. Present era is totally technology based; there is no any scope to operate business vigorously without technology. So each and every business sector in developed countries is using modern technology whereas our business mainly SME is using ancient methods which are not consistent with present up rising competition. Most of the small businesses in Bangladesh are not able to export goods to other countries after meeting the demand of own country. But it is also true that our SME sectors are developing day by day and it is contributing more in economics in Bangladesh than previous time.
Laws of SMEs in Bangladesh:
Under the new definition of Bangladesh Bank, “The Bangladesh Bank will deem an individual as an entrepreneur or a small business owner if the person is an owner or proprietor of a privately-run organization, or owns at least 51 percent of share in case of a joint venture or company listed with the Office of the Registrar of Joint Stock Companies and Firms”. The central bank also included- microenterprise and cottage industries in all of its SME loan policies and programmes.

* Taxation, Customs & Revenue Laws: These laws are related to the levy and collection of customs-duties and other allied matters, implementation of Government financial proposals of FY 2008-09 and collection and management of Income-tax matters in Bangladesh. Titles: * The Customs Act, 1969 * The Finance (2008-09 FY) Act 2009 * The Income Tax Ordinance, 1984 * The Travel Tax Act,2003 * The Value Added Tax Act,1991

* Investment Related Laws: * The Bangladesh Economic Zones Act 2010 * The Bangladesh Export Processing Zones Authority Act, 1980 * The Bangladesh Private Export Processing Zones Authority Act, 1996 * The Foreign Private Investment (Promotion and Protection) Act, 1980 * The Investment Board Act, 1989

* Bilateral Investment Treaties: A bilateral investment treaty (BIT) is an agreement establishing the terms and conditions for private investment by nationals and companies of one state in another state. This type of investment is called foreign direct investment (FDI). BITs are established through trade pacts. A nineteenth-century forerunner of the BIT is the friendship, commerce, and navigation treaty (FCN).

* Investment Related Policies: * Bangladesh Private Sector Infrastructure Guidelines 2004 * Export Policy 2009-2012 * Import Policy Order 2009-2012 * National Tourism Policy 2009 * Plot Allocation Policy in BSCIC Industrial Estate 2010 * Policy and Strategy for Public-Private Partnership (PPP) 2010 * Private Sector Power Generation Policy Of Bangladesh 1996 and revised 2004 * Renewable Energy Policy of Bangladesh 2009 * SME Policy Strategies -2005Banking & Financial Institution Laws * The Banking Companies Act, 1991 * The Financial Institutions Act, 1993 * The Money Laundering Prevention Act, 2009Insurance Laws * The Insurance Act, 2010

* Trade, Companies, Commercial or Mercantile Laws: * The Bangladesh Small and Cottage Industries Corporation Act, 1957 * The Bangladesh Standards and Testing Institution Ordinance, 1985 * The Companies Act,1994 * The Contract Act, 1872 * The Drugs (Control) Ordinance, 1982 * The Drugs Act, 1940 * The Negotiable Instruments Act, 1881 * The Partnership Act, 1932Securities & Exchange Laws * The Depository Act, 1999 * The Securities Act, 1920 * The Securities and Exchange Ordinance, 1969

* Land/Property Laws: * The Registration Act, 1908 * The Transfer of Property Act, 1882

* Imports-Exports & Shipping Laws: * The Bills of Lading Act, 1856 * The Imports and Exports (Control) Act, 1950

* Labor and Industrial Laws: * The Bangladesh Labour Act, 2006 * The EPZ Workers Association and Industrial Relations Act, 2004

* Consumer Laws: * The Consumer-Right Protection Act, 2009

* Intellectual Property Laws: * The Copyright Act, 2000 * The Patents and Designs Act, 1911 * The Trade Mark Act, 2009

* Foreign Trade & Foreign Exchange Laws: * The Foreign Exchange Regulation Act, 1947

* ICT laws: * The Bangladesh High-Tech Park Authority Act, 2010 * The Public Procurement Act, 2006 * The Information and Communication Technology Act, 2006Public Procurement Laws.

* Public Procurement Laws: * The Public Procurement Act, 2006

* Trade, Companies, Commercial or Mercantile Laws: * The Bangladesh Small and Cottage Industries Corporation Act, 1957 * The Bangladesh Standards and Testing Institution Ordinance, 1985 * The Companies Act,1994 * The Contract Act, 1872 * The Drugs (Control) Ordinance, 1982 * The Drugs Act, 1940 * The Negotiable Instruments Act, 1881 * The Partnership Act, 1932

* Securities & Exchange Laws: * The Depository Act, 1999 * The Securities Act, 1920 * The Securities and Exchange Ordinance, 1969

* Environmental Laws: * The Bangladesh Environment Conservation Act, 1995

* Procedural Laws: * 789 * The Arbitration Act, 2001 * The Artha Rin Adalat Ain, 2003 (The Money Loan Court Act 2003)

* Tourism Laws: * The Bangladesh Tourism Reserved Area and Special Tourism Zone Act, 2010

* Banking & Financial Institution Laws: * The Banking Companies Act, 1991 * The Financial Institutions Act, 1993 * The Money Laundering Prevention Act, 2009Insurance Laws * The Insurance Act, 2010

* Insurance Laws: * The Insurance Act, 2010

* Fire Service Laws: * Fire protection act, 2003
Overall condition of SMEs in Bangladesh:
In 2003 the International Consultancy Group (ICG) of the UK, in collaboration with the Micro Industries Development Assistance and Services (MIDAS), conducted the National Private Sector Survey of Enterprises in Bangladesh. The survey results drew the conclusion that there were approximately 6 million Small and Medium Enterprises (SMEs), which included enterprises with up to 100 workers employing a total of 31 million people, equivalent to 40 per cent of the population of the country of age 15 years and above. The survey also found that the industrial structure of SMEs consisted of primarily wholesale and retail trade and repairs (40 per cent), production and sale of agricultural goods (22 percent), services (15 percent), and manufacturing only (14 per cent). Thus the survey brought out the fact that the large untapped potential for expansion in manufacture and production could be exploited (or contributing more significantly to the national economy. Another vital findings of the survey under discussion was that SMEs contributed BDT 741 ($ 12.5) billion i.e. nearly 25 per cent of the GDP (BDT 2,996 billion) in 2003. It is reflected from this survey that enterprises employing 2-5 workers contribute 51 percent share of the total SME contribution to the economy, followed by 26 percent by those having only one worker and 10 per cent by those having 6-10 workers. For LDCs like Bangladesh, SMEs are a highly cost-effective route for industrial development.

Bangladesh is faced with a long list of complicated socio-political problems inherited from the past and very few effective measures have been undertaken by the concerned organizations to remedy these problems, to create a favorable climate for industrialization. These, in turn, have led to poor economic growth, low ca pita income and sub-human living conditions.

Though the agriculture in Bangladesh faces several adverse conditions for development, it is still the pivotal sector, around which rests the national economic development. To stimulate any development in agriculture, industrial development, particularly large scale industries are essential and this would also help the development of a sound industrial base. At the same time, contribution from the small and medium industries to the economy of Bangladesh is significant even at present and the future potential too, is great. Unfortunately, this sector of industries faces numerous bottlenecks like inadequate and inefficient infrastructure, inappropriate policies and actions of government, lack of effective implementation of policies, inefficient development institutions, inadequate financial assistance, absence of special financial institutions, and problem concerning labor, entrepreneur, technology, and market. Though such problems are common both for small and medium industries and the large industries, due to lack of power and resources, the former is affected more than the later.
Two among the innumerable problems particularly stand out, being primary elements of development. These are literacy and lack of adequate and efficient infrastructure. Government has to direct all its efforts in tackling these two basic issues as early as possible; as such efforts will pave the way for easier handling of the issues.
The BSCIC should be allowed to operate as a real autonomous body with ample resources and appropriate manpower. In spite of the several criticisms lodged against the BSCIC, it is not completely failed in discharging its responsibilities. It has all the potentials to act as a prime institution for the promotion and development of small and medium industries. Institutions for the train of workers and entrepreneurs should be encouraged to utilize existing resources to their optimal capacity and efficiency. A special financial institution for the small and medium industries should be created as soon as possible and during the transition period, the existing facilities of BSCIC and nationalized commercial banks need to be encouraged to create special units in their organizations to attend to the special needs of these industries. Consultancy and advisory services by capable people have to be created and delivery of services should be a full package of assistance covering technology, finance and marketing.
A national technology policy along with an effecting implementing institution is vital to promote technology development, assimilation and diffusion, as well as to coordinate the activities of institutions like BUET and BITAC. In the present context, promotion of technology subcontracting can be effective tool for the introduction of new technology and the improvement of existing technology. This should be a gradual process, taking into account the total integration of subcontracting industries in economy in the long run.
Due to the isolated and scattered location of the small and medium industries, they should be encouraged to form their own cooperative or associations , which will not only be able to create favorable public opinion but also service as a medium and make it convenient for the self-education of these enterprises about production, training, management, and marketing. It will not be wrong to state that because of the failure of these industries to create a strong public opinion in the country, there was never serious thought about the identification and solution of their problems.
Protected market for these industries by restricting the free flow of cheap foreign goods and at the same time ensuring fair competition within the country is essential to stimulate their production and quality improvement. Competition will also encourage the innovations of industries. Controls and restrictions should be withdrawn and processing of paper work should be improved in order to eliminate red-tape. Under the present context, these changes cannot be brought about overnight, but a beginning of the process is essential to create a favorable environment. This, in turn, would lead to the development of efficient small and medium industries in Bangladesh.
The road of development is always difficult and painful, particularly in the case of Bangladesh. Patience is required in every step in order to bring about a change in socio-politico-economic situation. The small and medium industries offer great hope for the overall national development of Bangladesh.
History of SME:
Understanding the transition from micro to small and medium enterprises (SMEs) in developing countries could help inform both the problem of the “missing middle” in the firm size distribution, and potentially play an important role in mapping a path for development. However, a fundamental question is whether, and how, SMEs in developing countries grew from micro enterprises, or if they began as SMEs. This project seeks to shed light on the inception point and possible transition of current SMEs through a survey of microenterprises and SMEs in Kolkata, India. The survey uses a novel design aimed at capturing not only current firm characteristics, but also the history of each enterprise, in an effort to better illustrate the development of the business through time. It asks business owners to track items of interest, such as an asset or laborer, that was present at the start of the business and to then follow the life of items added and removed after business start. Additionally, the survey is designed to track both positive shocks, such as innovations to production, and negative shocks, such as family illness, that the business faced. It will be supplemented with questions about the entrepreneurs designed to capture entrepreneurial propensity, motivations for entering or exiting self-employment, labor and education history, and ability. Armed with this historical picture of the entrepreneur and his businesses, the study aims to map the trajectory of growth from start to present of both current and failed microenterprises and SMEs.
While the descriptive nature of this research project is unique in its methodology, the grander goal of the endeavor is to help inform in what step of the life cycle of their business entrepreneurs are particularly constrained. This knowledge will be used as a basis for future studies on the growth of SMEs.
History of SME in Bangladesh: This is especially true for SMEs of our country as they are facing different types of problems for availing institutional finance though SMEs play dominantly important role in the national economy of Bangladesh by making up over 90 per cent of industrial enterprises, providing employment to 4 out of 5 industrial workers and contributing to over one-third of industrial value-added to gross domestic product (GDP). The relative SME share in manufacturing value-added is much higher and estimated to vary between 45to 50 per cent of totaling value-added generated by the manufacturing industries sector. Further as important sources of new business creation and developing new entrepreneurial talents, these industries provide the much needed dynamism and vitality to the national economy. Implementation of poverty alleviation action programs and strategies is a systematic and continuous effort in Bangladesh. For that purpose, the Poverty Reduction Strategy of the government has clearly identified some core principles and parameters both at macro and micro levels for reducing the existing poverty level at least half within 2015 as targeted in the Millennium Development Goals (MDGs). Rapid and sustainable growth of SMEs is undoubtedly one vehicle for accelerating national economic growth to the point of having a measurable impact in the way of reduction of poverty and unemployment, generation of more employment. More than 90% of the industrial enterprises in Bangladesh are in the SME size-class. Generally, SMEs are labor intensive with relatively low capital intensity. The SME also posses a character of privilege as cost effective and comparative cost advantage sin nature. The SME policy strategies have been formulated to assist in the achievement of the goals and targets the MDGs set by the Government. Contribution of SMEs to the economy. Until recently, public policy did not distinguish medium enterprises as a separate category and instead lumped it with large enterprises. Thus, industrial policies prior to 1999 divided the industrial sector into three categories — large, small and cottage. The cut-off limit of these size categories was determined on the basis of the size of fixed assets. Thus, the Industrial Policy 1991 defined “Small Industry” as industrial undertakings whose total fixed investment excluding the price of land, expenses for inland transportation and commissioning of machinery and appliances, and duties and taxes, was limited to Tk. 30 million (US $800thousand) including initial working capital, while the upper limit on the investment level in “Cottage Industry” was Tk. 500,000 (US $13 thousand).In contrast, the Industrial Policy 1999 distinguished medium from large industry and defined the size categories in terms of both capital and employment size. Thus, Large Industry” was defined to include all industrial enterprises having 100 or more workers and/or having a fixed capital of over Taka 300 million (US $6 million). Medium industry covered enterprises employing between 50 and 99 workers and/or with a fixed capital investment between Taka.100-300 million (US $2-6 million). ‘Small Industry” meant enterprises having fewer than 50workers excluding the cottage units and/or with a fixed capital investment of less than Taka100 million (US $2 million). “Cottage Industry” covered household-based units operated mainly with family labor.
Developments made in the SME sector as of now :
Because of the definitional problems mentioned above, information on SME is not readily available in Bangladesh. BBS conducts annual surveys of the manufacturing sector, called the Census of Manufacturing Industry (CMI), but as mentioned earlier the BBS lumps under the “Large” category information on all units with 50 or more workers and hence the information cannot be separated in most cases for the 50-99 workers size category, which is the more commonly used cut-off size limit for medium enterprises. Moreover, there is quite a bit of backlog in the processing of the CMI data. The latest available published CMI report is for the period 1999-2000. The prime agency for the promotion of small and cottage industries in Bangladesh is the Bangladesh Small & Cottage Industries Corporation (BSCIC). BSCIC is required to maintain information and data bank on small and cottage industries in Bangladesh and accordingly the agency carries out nation-wide surveys of the sector at some time intervals. However, the latest such survey by BSCIC was conducted in the late 1980s and it was based on the definition of small and cottage industries given in the earlier industrial policies that used capital rather than employment size as the cut-off limit. Fortunately, BBS carried out a nationwide census of all non-farm economic activities in 2001 and 2003 and a preliminary report based on the census has been made available recently. The report presents data by employment size category but there is no information on the size of fixed assets. The previous such national census of non-farm economic activities was carried out by the BBS in1986.
There are also some steps/measures taken by Bangladesh Bank for SME Development. Bangladesh Bank has already introduced several schemes and programmes to flourish and expand SME Enterprises. Refinance scheme funded by Bangladesh Bank, IDA and ADB has been facilitated for the development of SME Sector. Besides, to ensure institutional financial facilities under easy conditions Bangladesh Bank has taken diverse steps; like opening of ‘Dedicated Desk’ for SME and ‘SME Service Centre’ in the banks and special facilities for the women entrepreneurs. But reality is that expected outcome has not been achieved so far in this sector.

The guidelines formulated by the newly created department for compliance of the banks and financial institutions for the development of SME sector are enumerated below:

* For the first time in Bangladesh, an indicative target for SME loan disbursement has been set for 2010 by the banks and financial institutions considering SME development as one of the most important development agenda of the country. According to the target, SME loan shall be disbursed to the small, medium and women entrepreneurs.

* Following the 'Area Approach Method' banks/financial institutions will try to attain their indicative targets separately by dividing it as branch wise, region wise & sector wise.

* Each bank/financial institution shall follow a separate business strategy in financing SME loan with least formalities in executing documentation to ensure easy and speedy loan sanction and disbursement process. Priority shall be given to small entrepreneurs.

* For small entrepreneurs credit limit will be ranged from Tk. 50,000 (Fifty thousand) to Tk. 50,00,000 (Fifty lac).

* For more participation of women entrepreneurs in industrial development of the country and for conducting business activities by women entrepreneurs in large number, priority shall have to be given to potential women entrepreneurs in respect of SME credit disbursement.

* Banks & Financial Institutions shall put highest priority in receiving loan application from small and medium women entrepreneurs and settle the loan disbursement process within very reasonable time from the date of acceptance of the application.

* Each bank and financial institution shall establish a separate ‘Women Entrepreneurs’ Dedicated Desk’ with necessary and suitable manpower, provide them training on SME financing and suiltably appoint a lady officer as chief of dedicated desk. Branch wise list of ‘ Women Entrepreneurs’ Dedicated Desk ‘ should be sent to SME and Special Programmes Department of Bangladesh Bank within two months from the date of declaration of this policy and programme.

* Banks and financial institutions may sanction up to Tk. 25,00,000 to women entrepreneurs against personal guarantee. In that case, group security/social security may be considered.

* The success in SME loan disbursement will be considered as yardstick for further approval of new branches of the concerned bank. License for New Branches will be issued for financing the priority sectors like SME and agriculture from 2010 in the name of ‘SME/Agriculture Branch’ instead of ‘SME Service Centre; in order to involve banks in financing priority sector like SME and Agriculture’.

* Each bank/financial institution shall fix the interest rate on SME loan sector/subsectorwise. However, bank/financial institution will inform Bangladesh Bank sector/sub-sector wise rate of interest immediately and ensure disbursement of refinanced fund to the clients (women entrepreneurs) at Bank rate +5% interest.

* Training programs shall be arranged for the entrepreneurs.

Research Papers:
Mr. Debi S. Saini
Management Development Institute, Sukhrali, Gurgaon 122001, Haryana, India
Introduction: This paper discusses how issues of people management are addressed in Indian small and medium enterprises (SMEs). It also highlights the indigenous approaches to human resource management (HRM) that have surfaced in the Indian SME context. The research formulation has been built on the mapping of people-management practices in two SME case studies, one of which is also a family-based organization. The analysis shows that indigenous realities in HRM in Indian SMEs relate mainly to the provision of financial, emotional and social support to the workforce; employee involvement (EI) practices; recruitment; skill development; managing employee relations; and managing vis-à-vis labor law framework. The paper argues that in the sphere of people management in SMEs, the willingness to innovate and formalize the HR systems is constrained by a kind of bounded rationality, i.e., the owners of SMEs mostly believe that they are already doing what is humanly possible in this regard. The analysis has an important message for concerned practitioners—in order to realize their full potential and to progress towards fulfilling their vision; SMEs eventually have to intertwine indigenization and formalization for their people management approaches.
Methodology: This paper discusses recent research that uses new country-level and firm-level databases to assess the developmental impact of SMEs and to explore their growth obstacles and policies to overcome them. First, cross-country research using a new database on the role of SMEs in manufacturing sheds doubt on a causal link between SMEs and economic development and poverty alleviation. Second, there is evidence of a positive role of a competitive business environment - low entry barriers, effective property rights protection and ready access to finance on entry, entrepreneurship, productivity and economic development. Third, there is substantial evidence that small firms face larger growth constraints and have less access to formal sources of external finance. Fourth, financial and institutional development helps alleviate SMEs’ growth constraints and increase their access to external finance, thus leveling the playing field with large enterprises. Finally, the paper discusses the importance of the legal and information environment and of specific financing tools such as leasing and factoring for SME credit availability.
Problems of the research that should be solved: Despite the impressive performance of the economy during the last few years, the per capita GNP is still very low and is US dollar 310 a year. There exists a large disparity in the income levels. About 250 million people in the middle class constitute a major market for domestic and imported goods while an estimated 30% of her population lives below poverty line. Second, inflation is an area of concern and continues to be around 10% during the period 1991-92 to 1994-95. It is only in the last year that the rate of inflation has declined to about 6%. Third, the balance of payments situation is an area of concern. Imports in the Indian economy have been fueled up by liberalization while rate of growth in exports has not been able to keep pace with it.
Research paper:
Introduction: There is consensus among policy makers, economists, and business experts that small and medium enterprises (SMEs) are drivers of economic growth. A healthy SME sector contributes prominently to the economy through creating more employment opportunities, generating higher production volumes, increasing exports and introducing innovation and entrepreneurship skills. The dynamic role of SMEs in developing countries insures them as engines through which the growth objectives of developing countries can be achieved. It is estimated that SMEs employ 22% of the adult population in developing countries. United Nations Industrial Development Organization (UNIDO) estimates that SMEs represent over 90% of private business and contribute to more than 50% of employment and of gross domestic product (GDP) in most African countries (UNIDO, 1999). A recent study conducted by Abor and Quartey (2010) estimates that 91% of formal business entities in South Africa are SMEs, and that these SMEs contribute between 52 to 57% to GDP and provide about 61% to employment. The democratically elected Government of South Africa (SA) realised, as early as 1995, the importance of SMEs to the economy. The White Paper on National Strategy for the Development and Promotion of Small Business in South Africa (1995) highlighted the fact that “Small, medium and micro enterprises represent an important vehicle toad dress the challenges of job creation, economic growth and equity in our country” Methodology: This report is entitled “Literature Review on Small Medium and Enterprises’ Access to Credit and Support in South Africa”. As the title suggests, the methodology adopted for this study is the literature review. A research literature review is a systematic, explicit and reproducible method for identifying, evaluating and synthesizing the existing body of completed and recorded work produced by researchers, scholars and practitioners. This report provides an organized critical account of information, ideas and knowledge that has been published (or is available in the public domain) on SME access to credit. The main limitation of the literature review, as a study methodology, is that it relies on information which has already been researched (secondary information), and if there is none, then specific questions on the new study might not be adequately answered. Secondly, owing to different objectives and methodologies (and study designs) of previous studies, the data might not be in the right format or specific enough to answer the current study. Because of these limitations, a literature review is always conducted in preparation for primary and more detailed research. Despite the above limitations, this study employed the literature review process in a systematic way following the “input-processing-output” approach. This involves sequential steps to collect, know, comprehend, apply, analyze, synthesize and evaluate quality literature in order to provide a firm foundation to the topic under study.
Problems of the research that should be solved: Despite the impressive performance of the economy during the last few years, the per capita GNP is still very low and is US dollar 270 a year. There exists a large disparity in the income levels. About 350 million people in the middle class constitute a major market for domestic and imported goods while an estimated 45% of her population lives below poverty line. Second, inflation is an area of concern and continues to be around 12% during the period 1988-90 to 1991-93. It is only in the last year that the rate of inflation has declined to about 8%. Third, the balance of payments situation is an area of concern. Imports in the South African economy have been fueled up by liberalization while rate of growth in exports has not been able to keep pace with it.
India’s SMEs in the context of Bangladesh: There is no doubt that overall contribution of SMEs to the national economy is dominant comparing to large-scale industries. However, controversies continue with extent of contribution of this sector. The various categories of SMEs together contribute between 80 to 85 percent of industrial employment and 23 percent of total civilian employment. The robustness of SME contributions to employment generation is a common phenomenon in most developing countries in that the magnitude varies between 70 to 95 per cent in Africa and 40 to 70 per cent in the countries of the Asia-Pacific region. The most commonly quoted figure by different sources (ADB, World Bank, Planning Commission and BIDS) relating to value added contributions of the SMEs is seen to vary between 45 to 50 per cent of the total manufacturing value added. While compiling statistics on SMEs, one can get figures published by BSCIC, which covers only manufacturing units albeit partially. The latest BSCIC estimates suggest that there are currently 55,916 small industries and 511,612 cottage industries excluding handlooms. Number of cottage units shoots upto 600,000 units once the figure also counts the handloom sector, which indicates numerical superabundance of the SCIs in Bangladesh. According to Planning Commission the number of medium enterprises (undefined) is around 20,000 and that of SCIs to be between 100,000 to 150,000. This wide variation in the BSCIC and Planning Commission estimates of the numerical, size of the SMEs might be due to at least two reasons: (a) different set of definitions of the SMEs, and (b) different coverage of SME families [Ahmed, M.U 2001]. Whatever the correct magnitude, the SMEs are undoubtedly quite predominant in the industrial structure of Bangladesh comprising over 90% of all industrial units. This numerical predominance of the SMEs in Bangladesh’s industrial sector becomes visible in all available sources of statistics. This variety strongly suggests the need for adopting and using a uniform set of definitions for SMEs by all government agencies to help formulation of pro-active SME promotion policies. As the new definitions have been adopted in the Industrial Policy 2005 of the country, it would be very timely to harmonize the definitions by a number of key institutions: Bangladesh Bureau of Statistics, Finance Division of Ministry of Commerce, Planning Commission, Bangladesh Bank and all financial institutions, Export Promotion Bureau, Ministry of Commerce, and of course Ministry of Industry.
Reference: http://boi.gov.bd/?option=com_businesslaws

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