Lack of capital and access to credit remain as major barriers to cluster-based SME development, according to a latest study.
The study conducted by Bangladesh Institute of Development Studies (BIDS) also identified shortage of gas supply, load-shedding, lack of cluster-based SME development policy and land, problems with marketing and highly competitive markets as some other barriers.
"Access to loan at lower interest rates, arrangement of training for the workers, improvement in electricity and gas supply, creation of new markets and availability of skilled workers are badly needed for the development of cluster-based SMEs," said the study conducted in 2020.
The findings of the study were released on February 18, 2021.
It suggested that regular communication with SME traders, introduction of modern and advanced machines, availability of land, lower VAT and tax and allocation of space for clusters should be ensured for the development of cluster-based SMEs.
It also showed that about 28.8 per cent of clustered SMEs had fire service system as against 21.2 per cent of non-clustered SMEs.
The study titled "A Comparative Study on Clusters and non-Clusters Based SME Development in Bangladesh" found that the plastics and synthetics sector (about 30 per cent) in clustered SMEs ranked first in terms of having fire service system, followed by the micro garments sector (17.65 per cent).
On the evaluation of skills of workers as evaluated by SMEs, it found that skill level of workers was in between "somewhat satisfactory" and "satisfactory".
The study used secondary-level information as well as information obtained from consulting with SME Foundation (SMEF). The enterprise survey, key informant interviews (KIIs), and meetings included both cluster and non-cluster SMEs.
The sample size for the enterprise survey was 500 (250 cluster SMEs and 250 non-cluster SMEs). The KIIs included 75 cluster SMEs and 75 non-cluster SMEs.
In Bangladesh, there are nearly 7.9 million SMEs including micro enterprises contributing to Gross Domestic Product (GDP) at an estimated 25 per cent (Asian Development Bank 2015).
SMEs account for 11 per cent of the country's industrial establishments, 30 per cent of industrial employments and 40 per cent of manufacturing output (Economic Census 2013).
The main objective of the study was to assess comparative performance of the enterprises under cluster and outside cluster. The study was also conducted to identify the barriers and challenges and make recommendations for cluster-based SME development.
It revealed that about 41.2 per cent of clustered SMEs work with different research organisations, financial institutions, universities and business development services as against 31.2 per cent of non-clustered SMEs.
About 65.38 per cent of clustered SMEs work with NGOs for the purpose of training and about 37.18 per cent with financial institutions for the purpose of the loan.
About 31.6 per cent of clustered SME entrepreneurs received training on business apart from about 8.0 per cent non-clustered SMEs.
Talking to the FE, Dr. Kazi Iqbal, who was the study director, said credit at lower interest rates and easy terms (64.80 per cent), arrangement of advanced training for the workers (32 per cent) and availability of raw materials (16 per cent) are three major issues policymakers need to ensure for the growth of the SME sector.
"Both clustered and non-clustered SMEs add the majority of the value along with the production process of a product. Value addition to cluster SMEs varies from 70 per cent (micro garments industry sector) to 91 per cent (fabric clothing and consumer products sector)," he added.
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