Small Business in Bangladesh

Entrepreneurship and Small Business with special reference to
Bangladesh
Entrepreneurship is the result of a disciplined, systematic process of
applying creativity and innovation to needs and opportunities in the market
place. Successful entrepreneurship is a process that relies on motivation.
creativity, innovation and market place.
It is considered as the act of assuming the risk by an entrepreneur. It is the
dynamic process of creating incremental wealth.
Entrepreneurial Development Cycle
The efforts to promote and develop entrepreneurship and small
enterprise follow the spiral pattern. Each cycle in the spiral consists of three
categories of activities:
A. Stimulatory
. Support, and
!. Sustaining Activities
• A. The Stimulatory activities are needed to help emergence of
entrepreneurship in the society. These enable a supply of entrepreneurs to
start entrepreneurial venture and develop potentiality to succeed in the
venture.
• B. The Supportive Activities refer to those which enable the
entrepreneurs in setting up and conducting their enterprises. They help in
obtaining and mobili"ing resources and assistances.
• C. The Sustaining Activities include efforts which help the
entrepreneurs sustain themselves against the challenges of actual operation.
The promotional agencies need to organi"e sustaining activities to save these
enterprises.
Environmental Factors of Entrepreneurship Development in
Bangladesh
The environmental factors of entrepreneurship development in angladesh
are:
 Political environment: The e#isting political environment of the
country affects the entrepreneurship development to a significant e#tent.
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 Economic Environment: Economic environment is determined
mainly with the following factors:
% Capital
% Laour
% !aw material
% "ar#et
& Legal Environment: 'egal aspect of the environment is another
important factor for the entrepreneurship development. 'ots of disputes and
litigations take place here concerning issues affecting the business formation
and other business activities. The country has not yet been able to formulate
many laws of it(s own, rather it follows old, outdated cumbersome Indian
laws, which even India itself has changed. .
& Socio$cultural Environment: Socio)cultural environment has a far)
reaching effect upon the creation of entrepreneurs. Society do not yet place
entrepreneurship profession on it(s due position.
& State Environment: The role of state in creating a reservoir of
entrepreneurs in not yet up to the mark. ehavior of the non economic
factors have had a profound impact on angladeshi entrepreneurs.
Entrepreneurship Development %fter Lieration
The concept of entrepreneurship development emerged in angladesh
in and around the year of $*+,)+-. .ot ade/uate supportive steps were taken
up for the entrepreneurship development so long.
0ith a view to providing incentives and facilities in an order of priorities,
1overnment divided the country into 2eveloped Areas and 'ess 2eveloped
Areas. The indicative details of concessions and facilities are stated below:
Developed %reas
3i 4 In the developed areas, new industrial undertakings en5oyed a ta#
holiday for a period of five years after the unit goes into production,
provided 6, per cent of profits of such undertakings are re)invested in
approved or regular 1overnment bonds.
3ii4 The provision of accelerated depreciation 3three years4 and a
generous investment allowance will continue to be in force for some periods.
Less Developed %reas
-
1overnment, aiming balanced development of the country allowed
some preferential benefits and concessions to industries located within
S!$! Industrial Estates and outside the selected developed industrial
areas.
These are as follows:
• Import duty on capital machinery was only -7 percent for the
industries of less)developed areas.
• The industrial units will )also en5oys a rebate of 8, per cent of import
duty on spare parts for a period of five years. The concession will be
available only on the specific recommendation of the 2epartment of
Industries and not as a general rule.
• The financing institutions shall fi# the debt9e/uity ratio at :,:;, in
new industries in such areas. The period of repayment of loan may be
e#tended by additional grace period up to five years.
• The ta#)holiday for the industries of less)developed areas such as
S!I! Industrial Estates shall be for * years provided ;, per cent of profits
of such industries are re)invested.
E#port)<riented Industries
1overnment provides additional facilities for e#port)oriented industries.
These are:
 'ower interest rates in the case of pre)shipment and packaging
credits.
 'oans up to *, per cent of the value of a confirmed irrevocable
letter of credit are payable on its presentation to commercial banks.
 Income)ta# rebate is permissible on the e#port of non)
traditional items by as much as -8 per cent.
 The e#porters of certain items are allowed e#port performance
license which they can sell or utili"e themselves to make their products
competitive in international markets.
 State recognition in the form of awards and trophies is offered
to very successful e#porters of non)traditional items.
&overnment Policies in the Development of Entrepreneurship in
Bangladesh
The government by its actions can influence both the economic and
non)economic factors for entrepreneurship development. Any interested
1overnment in economic development can help, through its clearly
e#pressed industrial policy, promote entrepreneurship in one)way or other.
After the independence of angladesh governments of different
tenures took a long time to reali"e the need of entrepreneurship
;
development. 0e may get the scenario if we analy"e the development by
deferent government tenure.
& '()*$'()+ Period:
2uring this period trade policy of the country was mainly pro5ect)oriented.
As the country was 5ust free from an autocratic reign of =akistani 5untas and
the industrial infrastructure was damaged by the war of liberation, so,
government of the then period had no alternative but to initiate by itself.
=rivate participation over the industrial sector was totally stopped.
1overnment initiated to establish large number of nationali"ed industries. As
a result entrepreneurship development concept was totally lost.
& '()+$'(,* Period:
>rom this time government reali"ed the need of entrepreneurship
development for economic growth. 1overnment started to privati"e its seek
industries and introduced deregulation policies in industrial sector. .ew
private entrepreneurs were created with new enthusiasm. These governments
introduced mi#ed economic system.
& '(,*$'((- Period: =rivati"ation and deregulation policies started in
some specific sectors. Selling the seek industries to private sector got
momentous. Entrepreneurship was encouraged by formulating conducive
fiscal policies.
& '(('$*--. Period: 1overnments of these periods introduced market
economy to a significant e#tent. Initiated policies to liberali"e the trade
policies. =rivati"ation board was constituted to e#plore the environmental
opportunities. E#port)oriented privati"ation policy was introduced. 1ATT,
0T< established took up some issues in this country by the international
policies and to provide some ways and strategies.
Present Scenario of Entrepreneurship Development
After the emergence of .1<(s two things came into light:
& ?apid development of rural entrepreneurship.
& ?apid development of women entrepreneurship.
.1<(s help rural industries transform its high potentiality into reality in
employment generation. They serve as an antidote to the widespread
problems of disguised unemployment and underemployment staking the
rural territory. These industries have high potential for income generation in
rural areas.
.on)government organi"ations
@
% &rameen Ban#.
% "/D%S 0"icro /ndustries Development %ssistance and
Services1
% B!%C 0Bangladesh !ural %dvancement Committee1.
% Private Commercial Ban#s.
% Private /nsurance Companies.
% Federation of Chamer of Commerce and /ndustries.
% Leasing Companies.
% Proshi#a.
% /nternational Development Enterprises 0/DE1.
Future prospects of entrepreneurship development
>uture of the entrepreneurship development is prospective because
day)by)day rural infrastructure is developing. =eople are now very conscious
about their rights.
The following actions are suggested for better future of
entrepreneurship development in angladesh:
% >or promoting entrepreneurship vigorous training should be made and
proper entrepreneurial environment should be ensured in all levels.
% In entrepreneurial development programs different approaches should
be adopted for rural and urban entrepreneurs.
) Aotivational steps should be taken for people to come forward and take up
entrepreneurship as a career. =ersons having achievement and financial
power motivation should be given priority while planning for the
advertisement of any kind of enterprise development.
) =rovide training facilities to develop managerial and business capabilities
of
potential entrepreneurs.
Small Business
Small business is any business that independently owned and operated, is
not dominant in its own field and does not engage in any new or innovative
practices. It is an integral part of the total business scene in any country. It
means the si"e of which is not big % the si"e again depends on the yardstick
one uses to measure.
Categories of Small Businesses
There are si# different categories of businesses into which most small
businesses fall.
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 ?etail sales.
 Services
 >inance
 Agriculture
 0holesale
 Aanufacturing
>eatures of Small usiness
B They never grow large and the owners may not want it to.
B Small business is not dominant in its own field.
B Small business do not involve in innovative practices
B They prefer more rela#ed and less aggressive approach to running
the business.
BCThey manage their business in a normal way, e#pecting normal sales,
profit and
growth.
. They have little impact over industry.
23ectives of Small Business
<wing a small business provides an e#cellent opportunity to satisfy personal
ob5ectives while achieving the firm(s business ob5ectives. =robably no other
occupation or profession is this as true. ut there are many different reasons
for starting small businesses, as there are small business owners. Those
reasons are summari"ed as)))
To satisfy personal ob5ectives
To achieve business ob5ectives
Successive factors of managing the small business
& Serving an ade/uate and well)defined market
& Ac/uiring sufficient capital
& ?ecruiting and using human resources efficiently
& <btaining and using timely information
& !oping with 1overnment regulation
& Daving e#pertise in the field
& Aanaging time effectively
Small business in angladesh
6
The least developed countries have started refocusing their attention
on small enterprises to enhance the role in bringing about structural change
in their economies. In the recent era small business have emerged as the
cornerstone of economic development in angladesh providing the platform
for 5ob creation, income generation, development for foreword and
backward industrial linkages and fulfillment local social needs.

/nstitutional arrangement for developing small usiness
In angladesh for the development of small business there are some
institutional arrangement, which varies degrees of effectiveness in the
following areas:
>inancial support: 'ong)term finance venture capital or capital financing are
generally provided by angladesh ank, other speciali"ed bank and
financial institutions. !ommercial bank provide short term loan to business
enterprise regardless of the si"e in the form of general credit, industrial
credit, rural credit program, micro credit, special credit, etc at varying
interest rate of $$)$67 depending on the purpose. Aicro finance institutions
can be .1<s, savings and loan cooperatives, credit unions, government
banks, commercial banks or non)bank financial institutions.
>acilitation and support: Earious organi"ations are performing their
activities for the development of small enterprise and entrepreneurship and
these are %
) ) 1overnment <rgani"ations include S!I!, E=FA, oard
of investment 3<I4, =alli Garma % Sahayak >oundation
3=GS>4, .AS!I, A2!, AET and other financial
institutions like angladesh Shilpa ank 3S4, angladesh
Shilpa ?in Sangstha 3S?S4 and nationali"ed commercial bank such as
Sonali, Agrani and Hanata.
) ) =rivate organi"ations such as 1rameen ank, AI2AS.
) .on)1overnment organi"ations include =roshika, Associaltion
for social advancement 3ASA4.
Institutional arrangement for developing small business
& Duman resource development: Small business needs skilled
manpower for production, management and accounts. A number of
organi"ations are engaged in these activities such as IET, IT,
=olytechnic and Eocational Training Institutes, IA, S!ITI of S!I!,
AI2AS donor agencies like H<S, 1TA, Gatalyst and SE2>.
:
& =olicy Instruments: 1ovt has been supporting small business through
various policy formulations and their implementation. Ainistries of industry,
Ainistry of >inance and =lanning, Ainistry of !ommerce and angladesh
ank have evolved necessary policy measures supporting the growth of
small business.
& usiness 2evelopment Services: usiness 2evelopment Services
32S4 are designed to help micro, small and medium enterprises overcome
these barriers to increased productivity, profitability and access high value
markets so that they can reali"e their potential help to poor people work their
way out of poverty, grow local economies and creates 5obs.
!ole of Small Business in the Economic Development of Bangladesh
& !reates <pportunities for Employment
& Aobili"ation of economic resources
& Aobili"ation of factors of production
& 2evelopment of life Standards
& ?ural)Irban Aigration Ainimi"ation
& !reation of potential entrepreneurs
& ackward 'inkage Industries development
Trend in the growth of S!I sector
!reation of employment opportunities
Present Condition of Small Business in Bangladesh
According to a survey conducted in -,,;, there are appro#imately 6
3si#4 million small and medium enterprise 3SAEs4 which include enterprises
with up to one hundred workers employing working employing a total of ;$
million people e/uivalent to @,7 of the population of the country of age
group $8 years above. About three /uarters or more of the household income
in both urban and rural areas are provided by the SAEs. The survey also
found that the industrial structure of the SAEs consisted of primarily
wholesale and retail trade and repairs 3@,74, production and sale of
agricultural goods 3--74, services 3$874, and manufacturing only 3$@74.
Another vital finding of the survey under discussion was that SAEs
contributed Tk. :@$ billion or nearly -87 of the 12= 3Tk. -**6 billion in
-,,;4.
Contriution of S"Es to the &DP
4
+
Contriution to the employment y Small and Cottage industry
4
Prolems of small usiness development in Bangladesh
Aost of the small business in angladesh faces a number of
interrelated difficulties in their business. Some problems are given below %
& >ailure to get loan
& .eglected human factor
& !hanging govt. policy
& Information gap
& Absence of integrated package assistance
& Infrastructural problem
& Aarketing problem
& Inskilled labor, etc.
Solution to the prolem of small usiness
2ue to a large number of actual and potential customers and raw
materials there are a large scope of developing small business in
angladesh. There are two potentialities of developing entrepreneurship and
small business in angladesh. >irstly there is a huge amount of raw
materials and human resources. Secondly, there is a big market for it. Dere
are some suggestions for overcoming the problems of small business %
& !lear)cut govt. policy and anti corruption
& Aore emphasi"e on human factor
& Supportive incentive measures
& Information backbone
& >inance for new incubation of business
& Efficient marketing
& Infrastructural development.
Prospects of small usiness in Bangladesh
There is an upraising movement of development of small business in
angladesh. angladesh has carried out wide ranging policy reforms under
the structural ad5ustment programs that included deregulation of sanctioning
procedure and rela#ation of other regulatory barriers, easing of import
procedure, including trade barriers, following a market oriented e#port rate
policy and implementation of fiscal monetary and public enterprise reforms.
These reform structural policy removing a large number of small businesses.
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angladesh has also set up speciali"ed institutions adopted various programs
to provide credits, training and physical facilities to small business in a bid
to address structural limitations faced by this sector.
!onclusion
Entrepreneurship is essential to economic development or wealth
building. Entrepreneurship development means human resources
development. To promote and develop entrepreneurship and small enterprise
follow the spiral pattern. Each cycle in the spiral consists of three categories
of activities, namely) stimulatory, support, and sustaining activities.
Entrepreneurship development is a precondition for sustained economic
development of a country.
!onclusion
In angladesh small industries are those employing less than 8,
persons and having a fi#ed capital of Tk.$, crore and the medium industries
are those employing between 8, to ** workers and re/uiring investment
between Tk.$, crore and Tk.;, crore.The role of small and medium scale
industries in accelerating industrial development of the less developed
countries is well recogni"ed. The poor economy of angladesh can hardly
afford an entrepreneurship other than in small scale.
There are a large number of actual and potential customers and raw
materials available in our country. So, there is a tremendous scope of
developing small business in angladesh. Therefore we have to try to ensure
proper utili"ation of these resources for betterment of economic
development of the country.
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