Prospects and challenges of our CMSMEs

Cottage, Micro, Small and Medium Enterprises (CMSMEs) are often described as the lifeblood of our economy. They account for nearly 28 percent of national GDP and provide employment to more than 11.8 million people. Nearly 90 percent of our industrial sector consists of CMSMEs. Their presence is felt in almost every sector of our economy from textiles, handicrafts and agro-processing to plastics, light engineering and ICT. Despite this significant footprint, CMSMEs in our country is facing many problems.

 

 

In contrast, we see countries like Vietnam, Sri Lanka and Cambodia derive close to half of their GDP from the same sector. It manifests how far we still have to go. The challenges are not rooted in lack of entrepreneurial spirit rather they lie in systemic issues such as finance, infrastructure, branding and global integration.

 

 

One of the largest obstacles facing CMSMEs is access to affordable finance. Many of our small entrepreneurs operate without formal bank accounts rather they depend instead on informal moneylenders who charge exorbitant interest rates. Even when SMEs attempt to get loans from commercial banks, they are often asked for collateral they cannot provide.

 

 

A small garment accessories producer can hardly imagine of getting a loan without collateral securities from a bank. This firm might have steady domestic demand and aspirations to export, but it cannot go upward due to the lack of capital. Though the country has the moral obligation to patronize this firm, this is very rare. Thus the entrepreneurs often struggle to access the finance for expansion of the business this is because they have no sufficient collateral security to give.

 

 

Yes, central bank has eased the rules for the CMSMEs. But, some external factors still play as deterrent to achieve its goals. High interest rates, bureaucratic complexities and high compliance costs discourage many entrepreneurs. An entrepreneur somehow starts his business, but cannot expand or widen for this multifaceted difficulties. Thus this venture remains trapped in a cycle of underinvestment and low competitiveness.

 

 

Infrastructure constraints add another layer of difficulty. Frequent electricity disruptions, congested transport facilities and unreliable logistics services increase costs and reduce efficiency. Transportation of perishable goods from one district to another district is so risky due to poor road conditions. Long delay erodes profitability and undermines competitiveness in both local and export markets.

 

 

Perhaps the most critical weakness of CMSMEs is their limited ability to build strong brands and penetrate global markets. Many small producers rely on generic packaging and lack the resources to design attractive labels for their products. In this age, consumers are too much influenced by attractive design of the packages. When consumer perception is fully dependent on packaging and branding, in this parameter, CMSMEs products face in our country.

 

 

We have a rich tradition of weaving, pottery and handmade home décor. Yet, these products are often sold abroad through third-party distributors. This stripes identity of our products. But we see how Indian products get successful promotion under national branding campaigns such as such as "Make in India" and "Incredible India." India has managed to position its handicrafts as premium products in global markets by tying cultural heritage to modern marketing.

 

 

Another recurring problem is compliance with international standards. Certification for food safety, product quality and environmental sustainability is essential for export.But many SMEs find the process too expensive and complicated. As a result, they are shut out of lucrative markets in Europe and North America where compliance is non-negotiable.

 

For example, a honey producer in Khulna may sell successfully in domestic markets but struggle to enter Europe due to the absence of ISO certification. While the demand for organic honey is rising globally, lack of compliance locks the producer out of this high-value opportunity. When different developing countries are addressing the gap by creating government-supported certification centers that help small producers meet international requirements. These centers often offer subsidized laboratory testing, product standardization support and assistance with documentation and labeling compliance.

 

 

Our export economy is mostly dependent on ready-made garments. Undoubtedly our ready-made industry has brought significant growth, even we are keeping overreliance on this sector. But this overreliance has created vulnerability. Recently the United States has imposed reciprocal tariffs, this unexpected step has shown how overreliance on single sector can disrupt thousands of businesses at home.

 

 

Our CMSMEs often face strict regulations and fragmented institutional support. For instance, multiple agencies provide partial assistance, but coordination is weak. Entrepreneurs frequently complain about bureaucratic red tape in customs clearance, taxation and certification. Another often-overlooked challenge is consumer perception. Many consumers prefer imported goods over locally produced alternatives. They assume foreign goods to be of higher quality. This perception undermines our local SMEs, which struggle to build domestic recognition. These challenges are hindering the growth of our CMSMEs. We should give concentrated efforts to raise this sector to a height. I recommend some ways that may revitalize this sector.

 

 

1|) Banks should adopt alternative credit assessment models based on cash flow, transaction records and business performance rather than collateral alone. If bank feels too much risky then it can ask for additional collaterals. Besides, Fintech-based micro-lending platforms and credit guarantee schemes can reduce risk for lenders and expand credit access. The Bangladesh Bank could also expand refinance schemes at lower interest rates exclusively for CMSMEs engaged in export-oriented or technology-driven production.

 

 

2) Certification and compliance processes should be simplified.The government should establish regional certification and testing centers that will provide subsidized ISO, HACCP and organic certifications. This will make international market access more attainable for small producers.

 

 

03) Consumer perception towards our local products should be made better. This requires better quality better quality control along with nationwide campaigns. For instance, in 1970s, South Korea launched strong domestic campaigns to encourage citizens to buy homegrown products. Their campaign built confidence in Korean goods which later became global brands like Samsung and Hyundai. We could undertake similar initiatives to instill pride in local products to build the foundation for global competitiveness.

 

 

4) The gap between available skills and market needs remains wide. Government and private training institutes should collaborate to design short-term, demand-driven courses on modern machinery operation, digital marketing, packaging and e-commerce. Public-private partnerships (PPP) can accelerate the creation of specialized technical centers in each division.

 

 

5) CMSMEs should be encouraged to adopt energy-efficient machinery, digital tools and eco-friendly production methods. Tax rebates or low-interest loans could be offered for enterprises that integrate sustainable practices or automation.

 

 

6) Besides, if our CMSMEs were provided with support in packaging, certification and marketing strategies, we could achieve similar results. If our products could meet the aesthetic and regulatory standards of international buyers we could get access to platforms like Amazon, Alibaba and Etsy that could transform local producers into global exporters.

 

 

7) Diversification of our export business is urgently needed particularly in agro-processing, light engineering and ICT services. These sectorshold immense potentials. So, we should give focus on the investment in branding, certification and marketing to unlock new global opportunities.

The writer is a banker