THE cottage, micro, small and medium enterprises continue to suffer from complex rules and regulations and a lack of access to loans in the absence of effective and inclusive policies. A recent study by the SME Foundation, based on 304 SMEs in Dhaka, Chattogram, Sylhet, Khulna and Rajshahi, finds that most entrepreneurs struggle to comply with rules and regulations, including what they term a complex tax structure and the trade licence renewal process. About 57 per cent SME entrepreneurs mention, as the study says, tax structure as the main obstacle to doing business in compliance with the law while 54 per cent entrepreneurs consider the trade licence renewal process as an obstacle. Moreover, about 51 per cent entrepreneurs see the additional cost of trade licences as an obstacle, whereas 44 per cent find the complexity of government laws and regulations burdensome. Business experts have for long criticised the complex processes that an entrepreneur is required to go through to even start a business. The process is much less cumbersome even in neighbouring countries 鈥� entrepreneurs need certificates from at least 34 departments in Bangladesh while entrepreneurs in India need only seven certificates from various government departments to do business in compliance with the law.
Most CMSME entrepreneurs also suffer from poor access to loans, especially collateral-free loans. Even when the CMSME sector, composed of about 7.8 million enterprises, employs about 80 per cent of workers in the informal sector and when the sector has been declared a thrust sector for its growing contribution 鈥� almost 30 per cent 鈥� to the gross domestic product, the sector appears to be the most deprived sector when it comes to having access to finance. A Policy Research Institute survey shows that about 84 per cent of CMSMEs do not even have bank accounts. Lack of awareness and a shortage of required documents were found to be the main reasons behind the situation, which curtails small entrepreneurs from accessing loans from banks and non-bank financial institutions. Small entrepreneurs, therefore, mostly rely on loans from microfinance institutions at higher interest rates. Economists and policymakers have for long asked the authorities to ensure the access of the CMSME sector to loans from banks and non-bank financial institutions and have also asked the regulatory authorities to cut the maximum interest rate in microfinance institutions. The authorities appear to have largely ignored the demands. During the most depressed time of economic slowdown during the Covid pandemic, financial institutions failed to disburse loans to them.
The government should attend to the issues that have held back the growth of the CMSME sector. The authorities need to simplify the rules and regulations or introduce one-stop services so that entrepreneurs do not face any obstacle in doing business in compliance with the law. The government and the central bank should also devise ways to facilitate the connection between small entrepreneurs and financial institutions.