How entrepreneurship can strengthen the economy

Bangladesh positioned itself as a leading frontier of development with consistent economic growth and a population of 168 million, of which 50 percent is below the age of 35. As there is a mismatch between the country's economic supply and demand for labour, around 400,000 youths with university degrees are now unemployed, according to the Bangladesh Bureau of Statistics (BBS).

Here, entrepreneurship could address the gap by creating employment opportunities for this huge unemployed workforce. Different studies showed that regions with a higher level of Micro, Small and Medium Enterprises (MSMEs) and new entrepreneurs have a higher level of output and productivity.

TBS Illustration.

The interaction of entrepreneurship and economic development is vital, as it induces the economic agent to become a forerunner for growth. Nurturing the entrepreneurs will result in a positive impact on the economy, as entrepreneurial ventures generate new wealth and employment while existing businesses are confined to the limited scope and may hit the glass ceiling in terms of income.

Entrepreneurs determine the strength of the economy and may be regarded as the pioneer of socio-economic development owing to their skill and contribution to spotting business opportunities. An entrepreneur in the economy as an MSME allocates substantial input for enhancing support for the backward linkage industry. It also creates employment and helps flourishing micro, small and medium-scale enterprises in the rural and backward regions of the country that in turn enhances poverty alleviation.

Entrepreneurs and MSMEs are interrelated terms for Bangladesh as new entrepreneurs are new MSME businessmen. According to the BBS, around 13 million MSMEs contribute to 25 percent of the GDP and 35.5 percent of total employment. The MSME sector is hard hit due to the Covid-19 outbreak and facing challenges in accessing to finance market linkage, and product standardisation. There is also a lack of modern technology, sufficient training and skilled manpower.

Being urbanised fast, it is expected that by 2030, 48 percent of our population will live in towns and cities. Most of this large part of the population is young, energetic and digitally connected. Rapid urbanisation increased and penetrated mobile user fed by incremental consumption by more than 30 million middle-class citizens. This is indeed a huge market for new entrepreneurs. In the post-Covid-19 period, if we reap the benefit of domestic market demand with the new startup, entrepreneurs and MSME business, it will enhance the growth.

Several barriers have been shrinking the opportunities of the entrepreneurs to reach the growth momentum. The major barriers are lack of market knowledge, complicated process in registering and licensing of business, limited access to information on relevant government regulations, complicated tax regulations, limited access to supportive technologies and financing for the business.

The MSMEs have experienced hurdles to access the stimulus package, as the benefit of it was not well channelled to the affected entrepreneurs, while banks enforce strict procedures despite Bangladesh Bank's advice for resilient treatment for the potential clients. On the other hand, the current definition of SME and condition for bank-client relationships provided by Bangladesh Bank provide benefits to large scale manufacturers and industries to get credit at the cost of real MSMEs and entrepreneurs.

Moreover, pre-application for credit guarantee scheme before credit gain, 20 percent credit limit for the trading business, bankers' tendency to invest in secure government treasury bills instead of SME and more allocation of credit in urban areas than in the rural areas make MSME stimulus credit disbursement very insignificant against the demand, whereas large industry disbursement is relatively steady so far.

Promoting entrepreneurship through venture capital and financing support can convert huge untapped human capital into assets, ensuring inclusive growth to meet the criteria of the SDG. Furthermore, the cascading effect of employment and higher-earning contribute to higher national income, tax revenue and higher government spending for the citizens.

The fourth industrial revolution has opened tremendous opportunities for the new entrepreneurs to offset the benefit of new technology through creating jobs and employments by innovation, change and competition. According to the Oxford Internet Institute, Bangladesh has the second largest pool of online workers in the world, making progress with more than 93 million internet subscribers and 160 million mobile subscriptions throughout the nation.

A strong focus on training professionals in emerging technologies – the Internet of Things, BlockChain, Artificial Intelligence, Big Data and Analytics – can change the image of Bangladesh. It will brand Bangladesh as a country of skilled labour and create new entrepreneurs, entailing substantial socio-economic benefits for the population.

 As per the Doing Business index, the position of Bangladesh in starting a business is 131, reflecting how less Bangladesh is competitive in creating a business-friendly environment for the new entrepreneurs. While in Getting Credit, Bangladesh ranked 119, which need to be improved to develop entrepreneurs as the strength of the economy.

Initiatives need to be taken to enable entrepreneurship through various incubator programmes by both private conglomerates and the public sector, focusing on building a friendly ecosystem for startups and MSMEs. We should extend our help to the youth to take risks compared to their predecessors to reap the benefit of exploded technology and increasing connectivity through creating their unique brand easier than ever.

In a nutshell, for a sustainable startup business, it is vital to facilitate entrepreneurs by providing business capacity building, as path-breaking offerings by entrepreneurs in the new form of goods and services. It will result in new employment by producing a cascading effect on the economy. Policy support by the government plays a crucial role in nurturing entrepreneurship; whether it is in a fiscal incentive or non-fiscal incentive, the policy requires a balancing act run by the related authority.

Shams Arefin is a research associate and deputy secretary, R&D, Dhaka Chamber of Commerce & Industry. Email: shamsarafin052@gmail.com