Booster Sectors

STARTING SME BUSINESS SHOULD ONE OPERATE SME BUSINESS?
PREFERENTIAL CRITERIA Enterprises which as well as meeting the size requirement shall have a) proven credentials as an entrepreneur (for example, membership in well-recognized social occupational groupings, successful track record) with requisite presence and facilities on the ground; b) an above-average insiders equity participation; c) certifiable professional specialization of top-management in relevant production skills; d) the stamp of approval from globally-recognized quality-assurance bodies (ISO 9001:2000, for example); e) High management commitment to innovation. f) Women entrepreneurs will be accorded preference, wherever appropriate. g) Other things being equal, smaller enterprises shall be given preference in terms of benefits from interventions by the government and civil society initiatives. h) A preferential criteria be set based on the size of an enterprise smallest getting the top priority. i) Women entrepreneurs shall be given preference in conjunction with the above criteria.
BOOSTER SECTORS For promotional support the following 11 booster sectors has been identified and the list shall be reviewed every three years: 1. Electronics and electrical-computer components, peripherals, stabilizers, UPS, amplifiers, switches, plugs, printed circuit boards (PCBs), etc.---is legitimized owing to rising demand, as they provide among the foundation of industrialization and urban development. Given the per capita income of Bangladesh, they are characterized by high degree of linkage effects: while their growth spurs the demand for investment goods required in their production (backward linkage), the forward linkage part is likely to come from requirement for repair/maintenance services.
2. Software-development is worthy of selection because they intensively use knowledge of digital and/or web technologies. This is therefore easily accommodated on the basis of structural change. Furthermore, the marginal budget share of software-services in the countries in the Western world---the engines of the global division of labor---is a lot higher than the ABS. This is therefore a industry facing rising demand, too.
3. Light engineering and metal working is an industry in which local nature of the markets to be served implies that the typical output batch is fairly small, compared with minimum efficient scale (MES) of globally-branded companies. This offers a certain extent of natural protection from competition. In addition, this industry is suffused with both backward and forward linkages.
4. Agro-processing/agri-business/ agriculture plantation /specialized agriculture industry in Bangladesh has a future for itself. Its selection is anchored in strong comparative advantage and rising demand. However, the Taskforce would recommend that it had better be the agroprocessing industries of the non-traditional type, of the kind that moves away from rice milling and flour milling. We need agro-processors who essentially meet the following criteria: a) Intensively use farm produce that boast plentiful marketed surplus, and in addition are complementary to fixing nitrogen in the soil; b) Have enterprises and entrepreneurs who can deal with what it takes to successfully negotiate the hurdles implied by increasingly rigorous phyto-sanitary, and other epicurean restrictions in the importing countries;
5. Leather and footwear is driven by the recognition that the livestock sector in Bangladesh has ways to go in terms of matching the yield rates even in neighboring India---not to speak of China (where they are even higher). This suggests that leather production in Bangladesh has ways to go. Clearly, the production of footwear, in large part for exports, is a natural ambition for a SME roadmap. This industry is really suffused with backward and forward linkages.
6. Knitwear can be rationalized in terms of rising demand and strong comparative advantage.
7. Plastics and other synthetic products (such as resin) have been known to lead factor substitution, and have been selected on this basis. This sub-sector has registered the highest growth rates.
8. Healthcare & Diagnostics: The Taskforce recommends this subsector largely based on its rising demand domestically. Moreover, growing size of domestic market for specialized diagnostics has started to create opportunities for legitimate import substitution.
9. Educational Services: Bangladesh is clearly surplus in human beings. To convert human beings into human resources must surely be a service industry worth hundreds of billions of Taka worth of potential market size. And quality education that keeps successfully following the money trail meets the bill of both rising demand, and structural change.
10. Pharmaceutical, cosmetics and toiletries: In 2005 and beyond, Bangladesh is one of the few countries in South Asia to benefit from an exclusion from the patent regime being globally introduced by World Trade Organization (WTO). This by bringing forth some significant competitive advantages of pharmaceutical companies will likely create opportunities, especially in the medium-enterprise category, for that industry in Bangladesh. It is important therefore to accent public assistance in that particular direction in order to take advantage of such a market possibility.
11.
Fashion-rich personal effects, wear and consumption goods: The Taskforce accepts at
least one booster sector to be selected based on the need to concentrate efforts for promoting women entrepreneurs. The Taskforce believes that when it comes to leadership in matters of aesthetics, fashion and design delicacies, women entrepreneurs have an innate advantage. SWOT analysisunderstanding the SWOT of the business environment
SWOT ANALYSIS (FINANCIAL)

STRENGTH Government of Bangladesh is with positive mindset towards the SME Financing Central Bank (Bangladesh Bank) continuously monitors and supervises SME Financing of banks and non-bank-financial institution according to the National Credit Policy. In recent years, banks and financial institutions have been providing finance to the SME sector and the volume of finance is showing an increasing trend. Refinance scheme of Bangladesh Bank Banks are financing SME cluster industries. NGOs have been running micro credit programs.
WEAKNESS Administrative costs for SME financing are also higher for close monitoring and supervision than the large industries. Higher interest rate (18-25% or more in banks and 30-35% or more in NGOs) Real estate security for loans (land and buildings) No credit rating agency for SMEs. No Credit Guarantee Corporation Few Venture Capital investment. No business startup loan provided by the banks. Few SME development fund Limited budget of the government particularly for financial support to the SMEs. Limited financial scheme for the SMEs.
OPPORTUNITY Several banks offer collateral free loans up to a certain limit. There are many banks with attractive loan product for the SMEs. Financing women entrepreneurs with lower interest rate (9-10) and collateral free loan up to 25 lacs taka.
Equity Entrepreneurship Fund (EEF) is available in agro processing and software sector. Small Enterprise Fund (SEF) fund of Bangladesh Bank at lower interest rate THREAT Banks consider SMEs as high risk borrower A lion's share of SME loans (80%) is availed of for trading purpose, instead of manufacturing/service industries which is a threat for economic development in the country. Informal loan is increasing because of limited access to formal loans. Inflexibility, inefficiency, political interventions and corruption of the public sector financial institutions. Banking regulations are not always considered to be favorable which discourage the SME entrepreneurs to get loans from the banks

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STARTING SME BUSINESS SHOULD ONE OPERATE SME BUSINESS?

SWOT ANALYSIS (FINANCIAL)

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