Access to Finance

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Economic Policy Paper
on
Access to Finance for SMEs: Problems and Remedies

Prepared
under
The DCCI-CIPE, ERRA Project
(CIPE is an affiliate of the U. S. Chamber of Commerce, Washington, DC, USA)

The Dhaka Chamber of Commerce and Industry (DCCI)
65-66, Motijheel Commercial Area, Dhaka-1000

2003

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Economic Policy Paper on Access to Finance for SMEs: Problems and Remedies

Prepared by
:
Dr. A.K. Enamul Haque
and Mr. Sakib Mahmud
Subject Matter Specialists

Publishers
The Dhaka Chamber of Commerce and Industry (DCCI) &
The Center for International Private Enterprise (CIPE)
(CIPE is an affiliate of the U. S. Chamber of Commerce, Washington, D.C., USA)

Advisors
M. A. Momen, President, DCCI
Hossain Khaled, Sr. Vice President, DCCI
Md. Hossain A. Sikder, Vice President, DCCI

The Center for International Private Enterprise (CIPE)
Officials
Andrew Wilson
Senior Program Officer for Eastern Europe and Eurasia

The Dhaka Chamber of Commerce an Industry (DCCI)
Officials
Ferdaus Ara Begum
Additional Secretary & Coordinating Officer
DCCI-CIPE/ERRA Project

The DCCI encourages the reprinting and translation of this publication to achieve wider dissemination. Short extract may be freely reproduced with due acknowledgement of the source. Permission of the DCCI should be requested for more extensive re -production or translation. A copy of the re-printed or translation material should be sent to the DCCI.

This Project is supported by a Grant from the Center for International Private Enterprise in Washington, D.C., USA

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Contents
Chapter-1: Introduction
Chapter-2: SMEs in Bangladesh
Chapter-3: Financial sector of Bangladesh
Chapter-4: Country Comparative Study
Chapter-5: Data Analysis: Findings of the Study
Chapter-6: Recommendations
Appendix:
List of References
Glossary of Terms

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Economic Policy Paper on
Access to Finance for SMEs: Problems and Remedies
Chapter-1
1. Introduction
1.1 Small and Medium enterprises of Bangladesh are a heterogeneous group of industrial sub sectors comprising mainly of handlooms and handicrafts, small machine shops, printing press, bicycle and rickshaw assembly, agro processing firms, wood and steel furniture, small metal work and light engineering, electronics, cartwheels, footwear, plastic products, textile dyeing and block printing (manual), computer software and information technology, specialized silk weaving, print shops, small grocery stores, waste paper collection etc. In fact, SMEs provide over 87% of the total industrial employment and responsible for the creation of over 33% of industrial value added goods1 of Bangladesh (DCCI, 2003). Based on the new definitions of SMEs, which includes industries with investments of Tk. 50 crores, around 95% of the existing industries in the country can be classified as SMEs (Hussainy, 2003)2. Hence, the future of Bangladesh industrial development depends largely on the development of SMEs. 1.2 According to a survey conducted by Bangladesh Small & Cottage Industries Corporation (BSCIC), it was found that there were total 197 types of small industries with 38,294 industrial units in the country. Based on 2002-03 data, the sectoral contributions to GDP in Bangladesh were 11.20% for large and medium industries, 4.71% for small industries, the total being 15.91%, as against 18.23% for Agriculture and forestry and 67.05% for others (Ministry of Finance, 2003).

The contribution of the entire
manufacturing industry to GDP is still very low, particularly for small industries of the country and so it clearly shows that there is room for growth in the SME sector, especially for small manufacturing industries.

1.3 SMEs huge contribution to employment generation and the role they play in sustainable development prompted many countries around the world to come up with special programs and support organizations for the development and growth of this sector 3. Most of the policies that are developed...
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