The New Nation - Internet Edition

Syful Islam

The government is considering providing Export Credit Guarantee facilities to the Small and Medium Enterprises to encourage those in export trade, informed sources said.

A meeting of the Working Group on Business Entry and Operation of the Bangladesh Better Business Forum (BBBF) recently discussed the issue on how to extend the facility to the SME sector effectively.

The fourth meeting of the BBBF scheduled to be held today under the chairmanship of Chief Adviser Dr Fakhruddin Ahmed will take a decision on the issue.

At present the Export Credit Guarantee facility is offered to non-traditional goods to encourage export.

The Sadharan Bima Corporation has been operating Export Credit Guarantee Scheme since 1978 on 'no profit no loss' basis. Since inception of the scheme, 7,316 guarantees have been given to the non-traditional goods export.

The Sadharan Bima Corporation has so far earned Tk 34 crore as premium of the scheme and given Tk 24 crore as insurance claim. The unsettled claim of the schemes now stands at Tk 44 crore.

In recent days SME sector has been considered most effective sector that can help alleviate poverty. A report of the Bangladesh Bank said that development of SMEs can contribute a lot for poverty reduction.

The Bangladesh Bank annual report said higher growth of the SMEs can help cut poverty to a satisfactory level by eliminating various prejudices against labour intensive and creating jobs for the skilled manpower in the SME sector.

The report said, the key reasons behind the SMEs for not entering into large scale manufacturing industry are financial constraints, dismal state of utility services, technology and policy discriminations. On the other hand, bank and other financial institutions generally prefer large enterprise clients because of lower transition costs, and greater availability of collateral.

The SMEs also fall outside the reach of micro finance schemes, and thus are compelled to depend on formal sources of funds at much higher interest rates.

The BB report said that other interrelated problems like shortage of short and long term finance, lack of modern technology and lack of promotional support services are major obstacles in the way of development of the SMEs sector.

In Bangladesh the SMEs account for about 45 per cent of manufacturing value addition. They account for about 80 percent of industrial employment, about 90 per cent of total industrial units and about 25 per cent of total labour force. Their total contribution to export earnings varies from 75- 80 per cent based on the Economic Census 2001-2003.

The total number of SMEs is estimated at 79754 establishments, of which 93.6 per cent are small and 6.4 per cent are medium.