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ContentSerial no. Title Page no.
1 Summary
2 History of small and medium enterprises (SME)
3 Introduction
4 Practice of SME in different countries
5 SME in Bangladesh
6 Present situation of SME in Bangladesh
7 Changes in the size and structure of SME over time
8 Identifying the successive factors of SME
9 Table-1
10 Table-2
11 Identifying successive factors of SMEs in Bangladesh
12 Table-3
13 Table-4
14 Conclusion
15 Reference
Summary
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Small and Medium Enterprises (SMEs) are accounting for 25 percent of GDP, 80 percent of
industrial jobs, and 25 percent of the total labor force in Bangladesh even though the
prospective sector gets negligible facilitation from different support service providers. There
are various constraints that hinder the development of SMEs in Bangladesh, such as lack ofmedium to long-term credit, limited access to market opportunities, technology, and expertise
and business information. Lack of suitable incentives, inefficient and limited services from
relevant government agencies as well as poor capacity of entrepreneurs are other reasons for
the slow growth of SMEs. So, the present study has been undertaken in order to identify the
factors contributing to the success. The study has collected and used only primary data; and
consulted available literature for designing the questionnaire and study. The study has 10
variables contributing to the success of entrepreneurs. The study has identified factors
responsible for success of Entrepreneurs of SMEs: Relationship Factor; and Organization
Factor in order of magnitude. The study has suggested entrepreneurs of SMEs to consider
these factors while developing policies and strategies for SMEs.
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History of small and medium enterprises (SME)
Small and medium enterprises, short form (SME), are the forms of entrepreneurship business.
Since the dawn of human race, we can see that to fulfill ones need, we have to depend on
other. Therefore people began to exchange things with one another. Some people had
something large amount, so he they shared it with other and fulfill others need. So sharing
were the main business at the initial stage of earth and human survival.
Then money was introduced. People become conscious about the value of different things
according to their availability. In this part, people shared different things in exchange of
money. Different things were supposed as money then, for example, salt, peanuts etc. So we
can say that when people introduced money or the medium of exchange and began to use
them to exchange with things, self employed businesses and later on, enterprises were
introduced also.
Therefore, the history of SME is so rich to describe in short. It is related with our origin of
survival and development of earth. SME are liberal and low risky type of businesses, and so
they are getting populated day by day.
Introduction
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Small and medium Enterprises are the businesses that are organized by individual personal
effort; sometimes two or more people may be involved. The abbreviation of SME was first
used by European Union and World Bank.
Sometimes these businesses can be turned into large companies or public limited companies.
Now a day it is practicing almost every country in the world.
Small businesses need a little capital to establish and the most amazing part is that owner
owns all the profit from it. But the worst part is that all liabilities and losses also have to be
taken by the owner.
Bangladesh is developing country with a huge population. Most of the people are under the
poverty line. Therefore this type of business is preferable for them. There are no hard and fast
rules for establishing these types of businesses. So SME is easy and suitable for Bangladesh.
Practice of SME in different countries:
In Europe:
EU member states have had individual definitions of what constitutes an SME. For example,
the definition in Germanyhad a limit of 255employees, while in Belgiumit could have been
100.
In July 2011, the European Commission said it would open a consultation on the definition of
SMEs in 2012. In Europe, there are three broad parameters which define SMEs: micro-
entities are companies with up to 10 employees; small companies employ up to 50 workers,
whilst medium-sized enterprises have up to 250 employees. SMEs are also defined as firms
with either revenue (turnover) of 1050 million or a balance-sheet total of 1043 million.
In India:
In India, SME is divided into-
Small enterprise
A small enterprise is one where the investment in plant and machinery is more than
Rs.25 lakhs but does not exceed Rs.5crore.
Micro-enterprise
http://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Employeehttp://en.wikipedia.org/wiki/Employeehttp://en.wikipedia.org/wiki/Belgiumhttp://en.wikipedia.org/wiki/Belgiumhttp://en.wikipedia.org/wiki/Crorehttp://en.wikipedia.org/wiki/Crorehttp://en.wikipedia.org/wiki/Crorehttp://en.wikipedia.org/wiki/Employeehttp://en.wikipedia.org/wiki/Belgiumhttp://en.wikipedia.org/wiki/Crorehttp://en.wikipedia.org/wiki/Germany -
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A micro-enterprise is one where the investment in plant and machinery (their original cost
excluding land, building and items specified by the Ministry of Small Scale Industries in its
notification No. S.O. 1722(E) dated October 5, 2006) does not exceed Rs.25lakh.
Medium enterprise
A medium enterprise is one where the investment in plant and machinery is more than
Rs.5 crorebut does not exceed Rs.10 crore.
The definition of MSMEs in the service sector is:
Micro-enterprise: Investment in equipment does not exceed Rs.10 lakh
Small enterprise: Investment in equipment is more than Rs.10 lakh but does not
exceed Rs.2 crore
Medium enterprise: Investment in equipment is more than Rs.2 crore
The Indian micro- and small-enterprises (MSEs) sector plays a pivotal role in the country's
industrial economy. It is estimated that in value, the sector accounts for about 45 percent of
manufacturing output and about 40 percent of total exports. In recent years, the MSE sector
has consistently registered a higher growth rate than the overall industrial sector. The major
advantage of the MSE sector is its employment potential at a low capital cost. According to
available statistics (4th Census of MSME Sector), the sector employs an estimated 59.7
million people in 26.1 million enterprises;labor intensityin the MSE sector is estimated to be
nearly four times that of large enterprises.
In United States:
In theUnited States, the Small Business Administration setssmall business criteria based on
industry, ownership structure, revenue and number of employees (which in some
circumstances may be as high as 1,500, although the cap is typically 500). Both the US and
the EU generally use the same threshold of fewer than 10 employees forsmall
offices (SOHO).
In Kenya:
In Kenya, the term is SME (for "small, medium and micro enterprises"); elsewhere in Africa,
MSME stands for "micro, small and medium enterprises". Maximum number of employees
=? Maximum revenue or turnover
http://en.wikipedia.org/wiki/Lakhhttp://en.wikipedia.org/wiki/Lakhhttp://en.wikipedia.org/wiki/Lakhhttp://en.wikipedia.org/wiki/Crorehttp://en.wikipedia.org/wiki/Crorehttp://en.wikipedia.org/wiki/Labor_intensityhttp://en.wikipedia.org/wiki/Labor_intensityhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Small_Business_Administrationhttp://en.wikipedia.org/wiki/Small_businesshttp://en.wikipedia.org/wiki/Small_businesshttp://en.wikipedia.org/wiki/Small_officehttp://en.wikipedia.org/wiki/Small_officehttp://en.wikipedia.org/wiki/Kenyahttp://en.wikipedia.org/wiki/Kenyahttp://en.wikipedia.org/wiki/Lakhhttp://en.wikipedia.org/wiki/Crorehttp://en.wikipedia.org/wiki/Labor_intensityhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Small_Business_Administrationhttp://en.wikipedia.org/wiki/Small_businesshttp://en.wikipedia.org/wiki/Small_officehttp://en.wikipedia.org/wiki/Small_officehttp://en.wikipedia.org/wiki/Kenya -
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In Canada:
Industry Canada defines a small business as one with fewer than 100 employees (if the
business is a goods-producing one) or fewer than 50 employees (if the business is service-
based), and a medium-sized business as one with fewer than 500 employees.
In Nigeria:
The Central Bank of Nigeria defines small and medium enterprises in Nigeria according to
asset base and number of staff employed. The criteria are an asset base between N5 million
and N500 million, and a staff strength between 11 and 300 employees.
In Israel:
In Israel, a business is considered small if it has no more than 50 employees. A medium
business holds among 50 to 250 workers.
SME in Bangladesh
Until recently, public policy did not distinguish medium enterprises as a separate category
and instead lumped it with large enterprises. Thus,industrial policies prior to 1999 divided the
industrial sector into three categories large,
small and cottage. The cut-off limit of these size
categories was determined on the basis of the size
of fixed assets. Thus, the Industrial Policy 1991
defined Small Industry as industrial
undertakings whose total fixed investment
excluding the price of land, expenses for inland
transportation and commissioning of machinery
and appliances, and duties and taxes, was limited
to Tk. 30 million (US $800 Thousand) including
initial working capital, while the upper limit on the
investment level in Cottage Industry was Tk.
500,000 (US $13 thousand).
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In contrast, the Industrial Policy 1999 distinguished medium from large industry and defined
the size categories in terms of both capital and employment size. Thus, Large Industry was
defined to include all industrial enterprises having 100 or more workers and/or having a fixed
capital of over Taka 300 million (US $6 million). Medium industry covered enterprisesemploying between 50 and 99 workers and/or with a fixed capital investment between Taka.
100-300 million (US $2-6 million). Small Industry meant enterprises having fewer than 50
workers excluding the cottage units and/or with a fixed capital investment of less than Taka
100 million (US $2 million). Cottage Industry covered household-based units operated
mainly with family labor.
However, in the latest industrial policy announced in 2005, significant changes have been
brought about in the definition of the various size categories. In the Industrial Policy 2005, a
distinction has been made between manufacturing and non-manufacturing enterprises. In the
case of the manufacturing enterprises, sizes have been defined in terms of the value of the
fixed assets while in the case of the non-manufacturing enterprises the cut-off line has been
identified in terms of employment size.
Thus, large industry is now defined as units with fixed capital of more than Tk. 100 million
(US $1.6 million) excluding the value of land and building while non manufacturing largeenterprise is defined as units having more than 100 workers. Medium industry is defined as
units with fixed capital of Tk. 15-100 million (US $246 thousand - $1.6 million) excluding
the value of land and building while non 4 manufacturing medium enterprises are those with
employment size between 25 and 100 workers. Manufacturing enterprises with fixed assets of
less than Tk. 15 million excluding the value of land and non-manufacturing enterprises with
fewer than 25 workers are to be treated as small enterprise. While the definition of SME has
changed overtime in different Industrial Policy pronouncements, Bangladesh Bureau of
Statistics (BBS), which is the prime national organization responsible for generating and
compiling various types of statistics in the country has been consistently using an all together
different classificatory scheme. Thus, BBS defines enterprises having 10-49 workers as
Medium industries while those having 50 or more workers are identified as Large
industries. For industrial GDP data, the medium and large industries are lumped together
under Large category. The rest of the industrial enterprises including cottage industries are
grouped under the Small category.
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Present situation of SME in Bangladesh
Because of the definitional problems mentioned above, information on SME is not readily
available in Bangladesh. BBS conducts annual surveys of the manufacturing sector, called the
Census of Manufacturing Industry (CMI), but as mentioned earlier the BBS lumps under the
Large category information on all units with 50 or more workers and hence the information
cannot be separated in most cases for the 50-99 workers size category, which is the more
commonly used cut-off size limit for medium enterprises. Moreover, there is quite a bit of
backlog in the processing of the CMI data. The latest available published CMI report is for
the period 1999-2000. The prime agency for the promotion of small and cottage industries in
Bangladesh is the Bangladesh Small & Cottage Industries Corporation (BSCIC). BSCIC is
required to maintain information and data bank on small and cottage industries in Bangladesh
and accordingly the agency carries out nation-wide surveys of the sector at some time
intervals. However, the latest such survey by BSCIC was conducted in the late 1980s and it
was based on the definition of small and cottage industries given in the earlier industrial
policies that used capital rather than employment size as the cut-off limit. Fortunately, BBS
carried out a nationwide census of all non-farm economic activities in 2001 and 2003 and a
preliminary report based on the census has been made available recently. The report presents
data by employment size category but there is no information on the size of fixed assets. The
previous such national census of non-farm economic activities was carried out by the BBS in
1986. Information available from the recent BBS report has been presented in table-2. The
following appears to be the main features of this sector in Bangladesh:
Changes in the size and structure of SME over time
A comparison of the data from the Economic Census 2001 & 2003 with the data from the
previous census of 1986 (Table 3) suggests that the importance of the SME sector has
changed marginally during the inter-census period.
The share of SME in the number of establishments in the 10+ size group has slightly
declined from 95.6% in 1986 to 93.4% in 2001/03 while the share in employment
came down from 49.8% to 43.9%.
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The urban SME employment grew at an annual rate of 4.6/ raising the share of urban
SME in the employment in 10+ size group from 57% in 1986 to 63.8% in 200.
Non-manufacturing SME grew at a higher rate during the period causing the share of
manufacturing n SME employment to decline from 41, 3% in 1986 to 37.5% 2001/03.
Identifying the successive factors of SME
Successful Entrepreneurship is not an unmixed pleasure and blessing. The success of
business depends not only internal and external condition; but also on the capability and
quality of entrepreneurship. The study has consulted different literatures (Khan, 2000; Hold,
2002; Khanka, 2001; Ahmed, 1994 and www.google.com) for identifying the Key factors for
successful entrepreneurship. It has collected opinion of 23 entrepreneurs of SMEs on these
factors on five point liker scale. The study has expressed the collected opinions of the sample
entrepreneurs in terms of percentage weight as follows:
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Table-1: Size and Composition of SME in 1986
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Source: Economic census 2001 & 2003 national report (Preliminary), Bangladesh Bureau
of Statistics July 2005
Table-2: Size and Composition of SME in 2001/2003
Micro
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Micro
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a business, ability to take risk, professional network, and business management skills are key
successful factors for entrepreneurship. This implies that these entrepreneurial factors are
most important for entrepreneurship. The entrepreneurs have to concentrate more on to these
entrepreneurial factors in order to have a profitable niche in the competitive businessenvironment.
Identifying successive factors of SMEs in Bangladesh
Apart from entrepreneurial factors as have been mentioned following the success of an
entrepreneur depends on both internal and external factors. A Study (Ahmed 1981) has
segmented the various factors for the success into four categories. They are: a) psychological
factors,b) socio-cultural factors,c) personal factors, and d) opportunity factors. A summaryof the success factors of entrepreneurs based on available literature is shown as follows:
Table-3:Key factors of success for Entrepreneurship
Factors Most
Important
Important In Difference Less
Important
Least
Important
Prior work experience 508 30 - 12 -Lesson learned from
failure
48 20 11 05 16
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Own work 41 30 03 18 8Professional Network 36 41 12 06 05Availability of
financing
36 30 14 12 08
Lack of ability to takerisk
48 30 12 06 04
Ease of management 58 18 10 08 10Difficulty in raising
capital
56 16 08 08 12
Business management
skill
36 40 06 12 08
Knowledge about how
to start a business
56 26 04 04 10
Industrial and market
knowledge
30 56 - 14 -
Pressure to keep a
traditional and steady
job
32 30 20 18 -
Note: Data compiled by the researcher
On the basis of available literature and counseling with the experts, the present study has
selected a set of factors (shown in the table under section 1.3) that influence the success ofentrepreneurs of SMEs. The study has collected opinion of 23 sample entrepreneurs of SMEs
on five point liker scales; and employed multivariate technique Varimax Rotated Factor
Analysis for analysis of data. So, the analysis is subject to correlation analysis, principal
component analysis, rotated factor analysis, and finally factor score for ranking the factors
derived from principal component analysis.
Table-4: Successive factors of Entrepreneurship
Factors R.Cantillon
75
D.
Mcleland
61
A.Rahman
79
S.U.
Ahmed
81
J.A.
Hornday
82
J.J.
Koo
89
Risk taking
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Innovativeness
Well-
Coordinates
Self awareness
Self
confidence
Personal
initiatives
Knowledge
and
Information
Dynamism Long- term
involvement
Perseverance
and
determination
Opportunity
seeking
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Summarizing the findings of various major studies the SMDF lists the following important
positive changes taking place in the situation of the SMEs in Bangladesh:
SMEs have diversified their activities
Entry and exit into the sector has become easier
The RMG industry has contributed significantly to SME development by providing
them with orders for accessories and packaging materials
The development of the footwear industry has increased subcontracts to SMEs
Small-scale entrepreneurship has grown significantly in agro-processing in general
and in poultry in particular.
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Conclusion
The inference of the study is confined to the economies of SMEs in Bangladesh. The present
study has been an explorative one. It has tried to explore the variables contributing to the
success of entrepreneurs of SMEs by employing sophisticated multivariate technique-
Varimax Rotated Factor Analysis. The study has found following factors as significant for
entrepreneurial policies and strategies:
Factors Responsible for Success of Entrepreneurs of SMEs:
Relationship Factor; and
Organization Factor.
The study has suggested present and future entrepreneurs to take above factors into
consideration while making policies and strategies for SMEs. This is expected to give
entrepreneurs a competitive and sustainable advantage of understanding and doing business
in the globally competitive business.
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Referance
Determinants of Success and Failure of Entrepreneurs ofSMEs in
Bangladesh- An Explorative Study by S.M. NazrulQuadir.
SMEs in Bangladesh and Their Financing :An Analysis and Some
Recommendations by Md. ShamsulAlam and Md. Anwar Ullah.
FACTORS AFFECTING BUSINESS SUCCESS OF SMALL & MEDIUM
ENTERPRISES (SMES by) Dr. Mathew Philip
THE SMALL AND MEDIUM ENTERPRISES(SME) IN BANGLADESH: AN
OVERVIEW OFTHE CURRENT STATUS by Dr. MomtazUddin Ahmed.
The Business Bangladesh (a monthly English magazine of
Bangladesh), Vol. 3, Issue 9, June 2006.
The New Nation (a national daily English newspaper of Bangladesh),
June 7, 2005.
The Bangladesh Observer (a national daily English newspaper of
Bangladesh), December 26, 2005.
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Website name/ DateLog in/Log out
www.Ask.com 27/11/2012 5.00 am 5.27 am
En.wikipedia.org 27/11/2012 4.15pm 4.35pm
The business
Bangladesh.com
29/11/2012 3.15 pm 5.45 pm
The Bangladesh
observer
01/12/2012 6.00 pm 7.00 pm
www.skirec.com 02/12/2012 5.00 am 5.07 am