Assignment

Small Business in Rural Areas of Bangladesh

Introduction
Rural entrepreneurs play a vital role in the overall economic development of the country. The
growth and development of rural industries facilitate self-employment, results in wider dispersal
of economic and industrial activities and helps in the maximum utilization of locally available
raw materials and labor. Following are some of the important role which rural industries play in
ameliorating the socio-economic conditions of the rural people in particular and the country in
general. In almost every part of the world, limited access to finance is considered a key
constraint to private sector growth. 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). 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.
It is observed that 50.53 percent of SMEs have no access to formal source of finance. Only a
small portion of small businesses enjoy unrestricted access to the formal credit. Small and
Medium businesses are the backbone of the economy in countries like Bangladesh. SMEs suffer
from common constraints such as lack of capital, difficulties in procuring raw materials, lack of
access to relevant business information, low technological capabilities, problems caused by
cumbersome and costly bureaucratic procedures, and policies and regulations that generate
market distortions. However, with proper domestic policy support from the government, and an
eye towards global market trends, SMEs can build capacity and reap the rewards of
globalization.
Challenges
There are many difficulties with small businesses one of the main driving force in SME
promotion in Bangladesh is in the growth of agricultural based processing and essential
consumer goods products. Many institutions at the national level are providing assistance to
entrepreneurs through SMEs in the country.
Inability to Market SME Product
 The present and future growth prospect of any product depends to a large extent upon marketing
activity. This requires having a well-planned marketing strategy including advertisement
campaign as well as resources for implementing that strategy. Unfortunately, rural entrepreneurs
are at the bitter end in this respect as they cannot make adequate investments in marketing and
also lack necessary marketing skills.
Inconsistent Product Quality
A major constraint to the sustainability of rural business growth in Bangladesh is the inability to
maintain the quality of products these small business produce. At present Bangladesh produces
mostly common consumer goods which are labor-intensive and require relatively simple
technology. But due to poor quality these products cannot stand competition from imported
products.
Lack of Skilled Workers
Lack of skilled manpower is a fundamental problem in Bangladesh. This problem is especially
true for small and medium scale export-oriented enterprises. Bangladesh has made large inroads
in the world’s apparel market through commendable performance of ready-made goods sector.
However, the value addition of the products is low. Despite high demand, Bangladesh cannot
make much entry into high value fashion wear exports due to the lack of skilled workers.
Poor Management Skills of Entrepreneurs
In the modern-day economy, managerial skills are vital for survival of an industry, small or
large. Small entrepreneurs in Bangladesh are very much lacking in managerial skills and are not
used to plan ahead strategically. It is natural that they are unable to survive market failures. It is
still a relatively new concept of training rural businessmen In Bangladesh.
Resource Scarcity
In Bangladesh scarcity of raw materials hinder the ability of SME to be export oriented and
limits its ability to reach more efficient stages.
Absence of Modern Technology
Many SMEs have failed to adopt modern technology. Handling operation of the business
becomes difficult without using update technology. It cannot be imagine now competing around
the world with the absence of modern technology. Without the proper use of modern technology,
Business will not prosper after a certain point.
High Interest Rate
Most of our SME entrepreneurs are starting business by taking loan from banks or other
financial institutions. But there is high interest rate on such loans. It is not so easy to rise fixed
and working capital from banks, since banks are not so willing to provide loan of small size for
high monitoring cost that yields low profits for them.
Suggestion
Development of SME Infrastructure
It is a prerequisite to efficient development and financing of SMEs Currently, the most severe
constraint that hinder the development of SMEs is the lack of infrastructure (e.g., roads, gas and
electricity), limited access to market opportunities, technology, expertise and business
information and communication. Providing appropriate infrastructure for SME growth should be
given priority.
Quality of SME Products
Poor quality of products is a big setback for expansion of SME business and SME sector as a
whole. Measures for quality improvement and standardization of SME products have to be one
of the targets. The BSTI may be made more effective in monitoring quality of product both for
domestic market and for exports.
Training
Facilities for SME workers and Entrepreneur Bangladeshi workers are very good at learning
production skills and copying them. However, training facilities for SME workers and
development of entrepreneurial skills are not adequate in our country. Some training Institutes
like the Training Institute of BSCIC impart training but it is not utilized properly. Special
programs are to be undertaken for the establishment of training institutes regarding
entrepreneurship development. Most of the people engaged in this business have no proper
innovation skills.
Organizing workshop
Organizing Trade Fairs, Symposiums, Workshops on SMEs on a Regular Basis.A plan for
holding seminars, workshops, trade fairs, etc. on a regular basis should be formulated.
Setting up help desks in Banks and Business Promotion Bodies with Internet Facilities to extend
the outreach of SME development particularly in respect of women entrepreneurs.
Use of modern technology
Product design and technology is a very important aspect of SME development. Most SMEs are
characterized by indigenous technology and they are involved in improving their existing
production techniques and processes. If there is no use of modern technology and innovation
does not take place in an indigenous sector, enterprises become uncompetitive

conclusion
Modern time is the golden time of business. Now a day the idea of SME business is also
developed. So definitely it’s a matter of thing that, how to established an idea-with different
technique. The SME business in Bangladesh have a strong position in the days of competitive
market. SME entrepreneurs are continuously upgrading themselves with a view to be
competitive and to remain the best. As the experiences of SME finance in Bangladesh suggest,
there is critical need for putting in place a credit delivery system that evaluates the credit
worthiness of borrowers, on a basis other than fixed asset ownership. An effective SME finance
policy will have to cover such enhanced cost of credit administration. Credit and financing
facilities should also be given to NGO as well as non-bank financing organizations. The
financing scheme should also include special provisions for women entrepreneurs. Indeed, the
implementation of appropriate policies and strategies is a prerequisite to harness sustainable
competitiveness of SMEs around the country. The next step is to help SMEs prepare to meet the
challenge by understanding their strengths and weaknesses and providing the inputs they need to
help them upgrade. Only by properly educating and training the rural entrepreneurs they can
sustain their business and in return help the country’s economy.