What Are The Importance Of SME

Chapter Four: Theoretical Framework of the Study

4. Introduction

Small and Medium Enterprises (SMEs) are now the great concern to develop the economy in the world. It is beyond all controversies and debates that SMEs comes to play role to make ‘positive growth’ in national economy. The factors or determinants related to the SME and banking service have described in this chapter.

4.1 Importance of SME in Bangladesh

Small and Medium Enterprises (SMEs) considered as a dominant form of business organization in all countries, naturally accounting for over 95 percent of the business population. OECD recognized that SMEs constitute an important dynamic element in all economies as they drive innovation, especially in knowledge-based industries;

The overall economic development of the country is closely interlinked with the development of the MSME sector. MSME is still now one of the largest employment generating sectors of Bangladesh. Besides, MSME makes the largest contribution to favorable Balance of Payment position through providing raw materials for industry, reducing imports and enhancing exports.

MSMEs are getting the highest priority from policymakers due to their already proven multidimensional contribution to the socioeconomic environment of a country. These enterprises are easy to start, require only minimum capital, employ a comparatively higher number of people, and produce goods that meet local demands as well as contribute to export earnings.

MSMEs are important for self-employment, generating employment opportunities for others, increasing GDP growth, contributing to export earnings, supplying livelihoods to stakeholders, and poverty alleviation of the country. Cluster-based MSME entrepreneurship development could be an effective tool to generate local employment. But existing challenges like creating skilled manpower as per sectoral demands, providing product-specific manufacturing skills to the youth, improving productivity and product quality by adopting new technologies, increasing investment capacity by creating and maintaining an enabling environment through

It is hardly an overstatement to say that small and medium enterprises are pretty much synonymous with manufacturing industry.

4.3 SME for Bangladesh and Worldwide

The significance of SMEs can be clearly observed if we take a look at the contribution of MSMEs in some select Asian countries. For example, about 97.3 percent of enterprises in China, 97.3 percent in Malaysia, 97.5 percent in Kazakhstan, and 97.7 percent in Vietnam are MSMEs. Furthermore, about 99.4 percent of enterprises in Singapore, 99.5 percent in Sri Lanka, 99.6 percent in the Philippines, 99.7 percent in Thailand, 99.7 percent in Japan, and finally, 99.9 percent in the Republic of Korea are MSMEs.

MSMEs also play a vital role in employment in these countries. For example, MSMEs make up 87.7 percent of employment by enterprise in the Republic of Korea, 80.3 percent in Thailand, and 71.8 percent in Cambodia. Similarly, MSMEs are contributing to GDP growth and increasing export earnings of these countries. They generate 60 percent of GDP in Indonesia and China, 47.6 percent in the Republic of Korea, 45 percent in Singapore, and 43.7 percent in