In praise of small

Highlight:

• The government's strategy is to make entrepreneurship less costly – in time, money and paperwork.

• The first target is bureaucracy. The government wants to cut the time needed to start a business – and reach the stage of importing machinery or exporting products – from 355 days to just 14

The World Cup has a new darling. Cape Verde, home to around 525,000 people, has become the smallest nation ever to reach the tournament's knockout stage – drew all three of its group games. 

Next comes Argentina – and with Lionel Messi staring at the wall of Vozinha, the 40-year-old goalkeeper who embodied the grit of his nation.

The deeper lesson goes far beyond football. Size is not destiny. What matters is efficiency, discipline and skill. Economics has a name for this: productivity.

The world's richest economies did not begin with giant corporations. They began with countless small firms that learned, expanded, and competed. 

As an untapped potential, Bangladesh's next phase of growth will depend on how many of its SMEs can do the same.

Why do some countries become rich while others remain stuck in the middle-income trap? Economists usually point to one answer: productivity. 

Sustainable growth comes not from employing more people or building more factories, but from producing more with the same workers, capital and resources.

That is why SMEs matter.

Bangladesh's small and medium enterprises (SMEs) contribute 28% of GDP. Under the draft SME Policy 2025, the government wants to raise that share to 35% by 2030 – not because SMEs are small, but because they represent the country's biggest opportunity to fuel economic growth.

The world's richest economies reached the same conclusion long ago.

The United States, home to corporate titans such as Apple, Amazon and Microsoft, is also home to millions of small businesses. They account for 99.9% of all firms, generate 43.5% of GDP, represent more than 97% of exporters and contribute one-third of the country's exports, according to the US Small Business Administration.

Europe follows the same pattern. SMEs make up 99.8% of enterprises across the European Union, employ around two-thirds of the private-sector workforce and generate more than half of business value added, according to the European Commission.

The story is remarkably similar across Asia. India's MSMEs contribute around 31% of GDP and nearly half of exports. In Malaysia, MSMEs generate almost 39.5% of GDP and account for 49% of total employment. In Pakistan, SMEs contribute around 40% of GDP and employ more than 80% of the non-agricultural labour force.

Different countries. Different economic models. The same lesson.

Prosperity is not determined by how many small firms an economy has. What distinguishes successful economies is their ability to help those businesses become more productive.

Today's microenterprise becomes tomorrow's manufacturer; today's supplier becomes tomorrow's exporter; today's startup becomes tomorrow's industry leader.

Economic development is, in many ways, the story of small firms becoming larger, more productive, more innovative, and improving living standards of those working in the sector.

Why SMEs are struggling

Amid fragile economic conditions, Bangladesh's SMEs are operating in one of the toughest business environments in years.

Rising business costs driven by high energy prices, persistent inflation that has eroded consumers' purchasing power and weakened demand, and higher lending rates that have made borrowing more expensive have created a challenging operating environment.

At the same time, private-sector credit growth has slowed to a record low in history, making it harder for businesses to finance expansion.

Many firms face structural constraints as well. 

Limited access to finance for new ventures, shortages of skilled workers, weak technology adoption, inadequate marketing networks and poor branding continue to hold back productivity. 

Concerns over law and order have added another layer of uncertainty for businesses.

Access to finance also remains uneven. 

Women entrepreneurs received only 7% of the Tk2.17 lakh crore in CMSME loans disbursed in 2025 while overall CMSME lending increased by just 1.3% during the year.

What Bangladesh plans to boost SMEs

The government's strategy is to make entrepreneurship less costly – in time, money and paperwork.

The first target is bureaucracy. The government wants to cut the time needed to start a business – and reach the stage of importing machinery or exporting products – from 355 days to just 14. A high-level committee has already begun reviewing the process of licences and approvals to make that happen.

The second is the cost of doing business. 

Registered SMEs with annual turnover of up to Tk50 lakh will pay no income tax, while women and entrepreneurs with disabilities will enjoy the same benefit up to Tk70 lakh. 

Startups, innovative ventures and technology-based SMEs will continue to pay zero turnover tax. 

The turnover threshold requiring audited financial statements has also been doubled from Tk5 crore to Tk10 crore, reducing compliance costs for smaller firms.

The tax system is becoming simpler too. 

SMEs will file VAT returns every three months instead of every month using a simplified online form. 

Startups will receive a full waiver of the 15% VAT on local services, service imports and rentals until 30 June 2035. 

Small and retail traders will also be able to pay VAT through a flat-rate, record-free system.

Access to finance is another focus. 

Bangladesh Bank has earmarked Tk5,000 crore under its CMSME refinancing programme, while another Tk2,000 crore will be channelled through IDCOL, BIFFL and the SME Foundation. 

The budget also proposes Tk500 crore for startup, women and youth entrepreneurs in the IT sector and Tk300 crore to support the creative economy.

Trade measures complete the package. 

More export-oriented SME sectors will be allowed to import raw materials against bank guarantees without obtaining bond licences. 

The mandatory 30% value-addition requirement for those imports has been scrapped, while bond validity has been extended from one year to three years for selected exporters. 

The budget also lowers duties on inputs such as biodegradable composite paper and semiconductor materials, while raising protection for selected domestic industries, including light engineering, ceramics and fish processing.

Individually, these are technical reforms. Collectively, they reflect a different philosophy. 

The aim is no longer simply to support SMEs, but to remove the frictions that stop them from growing.