Small enterprise development in Bangladesh : a study of nature and effectiveness of support services

Abstract

This thesis examines empirically the demand for as well as the supply, design and the effects of small enterprise support services in Bangladesh. Recognition of the role of small enterprises in economic growth and development has resulted in promoting institutions for providing support services to these enterprises in most developing countries. From the very beginning, expectations have been very high on the effectiveness of this supply-side intervention in fostering healthy growth of the small enterprises sector. As a result, there now exist numerous agencies, both in the public and private sector, for providing support services. However, the initial high expectations about the effectiveness of these services now seem somewhat over optimistic or, as in some cases, even unrealistic, giving rise to a re-examination of the effectiveness of these services and the institutions involved, particularly between the public and private sector organisations. In the literature, apart from the question of the nature and need for support services from small enterprises, there is also the issue of how these services can be evaluated. To address the issues of evaluation, a framework is developed, bringing together major influences on the evaluation process. The framework was applied to a sample of predominantly manufacturing small enterprises, located in the district of Dhaka - the capital city of Bangladesh. Data were gathered through interviews with owner-managers of the small firms. The study also surveyed major public and private support agencies involved in the small enterprise sector. The findings support a view that, overall, the effect of assistance is low, in terms of growth in sales, employment and value added. Financial assistance, however, seems to have a considerable effect on survival, start-up process, production and sales turnover of small firms. Here, the study underlines the importance of extensive support, comprising financial and non financial components. It uncovered that most firms do not receive the services they need and want. The study confirms the view that an agency - which is private, small, autonomous, closer to its clients in terms of people, processes and structures employed, and provider of financial and non financial assistance - can effectively meet the needs of small firms. Thus, private support agencies are well suited in terms of design and are more effective, perhaps due to their pre-selection of few viable small firms, unlike the public agencies. There is evidence, however, to conclude that public support organisations play a major role in the survival of small firms, usually less attractive to private support agencies. Overall, the study underpins the view that assistance can be a trigger to the development of small enterprises, if it is selective. Evaluation of support services, as the findings suggest, can be done by an exploration of the supply-demand interaction, viewing supply-inputs through a process to ultimate outputs. Finally, the study recommends, among others, a restructuring by formation of partnership between the public and private support agencies for the promotion and development of small enterprises in Bangladesh.