Transforming SMEs: How govt plans to turn the sector into key economic engine

The Investment Coordination Committee has held a series of crucial meetings, aiming to fundamentally transform the Small and Medium Enterprise (SME) sector into the main engine of Bangladesh's national economy, with a central focus on ensuring the direct participation of entrepreneurs in the policy-making process to integrate the sector into the economic mainstream. 

The dialogues were attended by the committee President and Chief Adviser's Special Envoy on International Affairs, Lutfey Siddiqui, along with Bangladesh Bank Governor Ahsan H Mansur, National Board of Revenue (NBR) Chairman Md Abdur Rahman Khan, and representatives from both public and private sectors. Details of the initiatives were outlined by the Chief Adviser's Office in the capital today (1 November).

Decisions implemented:

Initiative to remove the regulation that mandatorily requires 10% of funds received from foreign orders to be deposited in a bank.

The SME Foundation's proposal to allocate a separate foreign currency quota of a minimum of $3,000 per year for each business entity has been forwarded to the central bank governor.

Four more decisions adopted at BB meeting:

New financial product design: SME Foundation and SME & Special Programmes Department (SMESPD) will jointly organise a workshop to design working capital or SME-friendly products for the sector.

Policy effectiveness evaluation: The effectiveness of the SME Master Circular issued by SMESPD will be assessed through a performance evaluation.

Feasibility of lending without trade license: SMESPD will conduct a feasibility study to determine if it is possible to provide loans of up to Tk5 lakh without a trade license.

Interest rate review: SMESPD will provide feedback on whether customer-level interest rates can be adjusted to make the bank refinancing scheme more attractive.

Previously, the Investment Coordination Committee discussed various SME challenges – such as Payment, Customs, License, and Loan – at a meeting held at the Chief Adviser's Office on 28 August.

Following this, another meeting was held on 21 September, where entrepreneurs' experiences, challenges, and proposals were heard for two hours. Based on these discussions, specific recommendations were formulated and sent to the concerned ministries and agencies.

Subsequently, an online meeting was held on 8 October, with SME entrepreneurs from various districts across the country.

Decisions under implementation:

NBR monitoring intensified to expedite and simplify the sample clearance process.

BB's initiative to amend regulations to provide entrepreneurs with ICT sector-like benefits when receiving payments through digital wallets.

BB's directive to SSL Commerce and other relevant banks to ensure online sales revenue is quickly deposited into the entrepreneur's bank account.

BB's step to include B2B and B2C models in the existing policy for exports through online marketplaces.

BB is undertaking awareness programmes to promote policies formulated for SME entrepreneurs.

Proposal by the SME Foundation to launch a special foreign currency/endorsement card for entrepreneurs.

Bangladesh Foreign Trade Institute's initiative to publish a report on the SME sector for international buyers and clients.

Coordination between the SME Foundation and the CAO to implement a Standard Operating Procedure (SOP) through the embassies abroad to boost exports.

Discussions between the SME Foundation and the Bangladesh Investment Development Authority (BIDA) to resolve issues related to Agro-Organic Certificate issuance.

Increasing the limit for advance payments without bank guarantee from $10,000 to $20,000, and the payment limit from ERQ (Export Retention Quota) accounts from $25,000 to $50,000.

Authorisation for export transactions on open account with coverage from local insurance companies.

Initiative to publish a flowchart on social media to easily explain the trade payment process to businessmen.

Additionally, the NBR decided at the 28 August meeting to resolve HS Code complications. Customs authorities will now complete the valuation if the first four digits of the eight-digit HS Code match.

Regarding that, Lutfey Siddiqui said, "A key purpose of reform is to increase dynamism in the economy. Collectively, the SME sector is a huge contributor to our economy, though their voice is not heard as loudly as some large businesses. 

"We must help boost the dynamism of SME entrepreneurs and ease their business at every stage, from financing to payment and logistics. The government must be a facilitator, not a hindrance."