Tk7,000cr SME fund to boost small business financing, but entrepreneurs demand proper monitoring

The SME Foundation and entrepreneurs believe the proposed Tk7,000 crore SME fund, if implemented, will significantly improve access to financing for small and medium entrepreneurs though they stress the need for proper monitoring to ensure funds reach the right recipients.

The government has taken an initiative to form a Tk5,000 crore stimulus fund to boost the Cottage, Micro, Small, and Medium Enterprises (CMSME) sector, a key driver of the country's economy and to generate employment.

In addition, a proposal will be placed to allocate a further Tk2,000 crore in the upcoming FY2026-27 budget for distributing low-interest loans through the Infrastructure Development Company Limited Bangladesh Infrastructure Finance Fund Limited and the SME Foundation.

Finance Minister Amir Khosru Mahmud Chowdhury announced the allocation while presenting the national budget in parliament today (11 June). 

Speaking to TBS, General Manager of the SME Foundation Mohammad Jahangir Hossain said, this initiative would have a significant positive impact on small entrepreneurs. "With this fund, we will be able to provide loans on easy terms, even without collateral. This will give small and medium entrepreneurs the opportunity to expand their businesses," he said.

He further noted that entrepreneurs often face numerous hurdles when seeking bank loans, but channelling credit through the SME Foundation's wholesale lending mechanism would simplify access to financing.

According to Hossain, the three primary challenges currently facing the SME sector are access to finance, access to markets, and improving product quality. He also added that the Foundation is now working to enhance market linkages, product development, and financial access through cluster, and sector-based programmes.  

SMEs dominate Bangladesh's economy

According to the Economic Census 2024 conducted by the Bangladesh Bureau of Statistics, the country has 11.70 million economic units employing approximately 30.6 million people directly and indirectly. CMSMEs account for 99.92% of all economic units and 77.87% of total employment nationwide.

Micro enterprises lead with 6.63 million units (56.67%), followed by cottage industries at 4.53 million (38.74%). Small industries make up 4.20%, medium industries 0.31%, and large industries just 0.08%.

The SME Foundation has identified 177 clusters across the country, including light engineering, handloom, Nakshikantha, small garments, handicrafts, and leather goods.

Esrat Jahan Chowdhury, founder of TULIKA, welcomed the dedicated allocation, noting that the SME Foundation works directly with small entrepreneurs and therefore it understands who genuinely needs financing. 

"In our country, small entrepreneurs find it quite difficult to access loans on easy terms. A separate allocation for the SME Foundation will enable more of them to expand their businesses," she told TBS.

She, however, urged caution. "It must be ensured that the funds are properly monitored and actually reach the right entrepreneurs," she clarified.