Employment in SME sector grows 50% in the last 5 years

Despite challenges in access to finance, SME (Small and Medium Enterprise) sector has witnessed impressive growth in terms of employment generation at annual 50 percent rate in the last five-year average period till the year 2019, according to a survey.

The total employment growth increased by 75 percent between 2016 and 2019 indicating that recent established firms have been expanding more in terms of employment generation.

The findings came in a survey titled "Access to Finance for SME & Impact on Job Creation: Empirical Evidence based on IDLC Finance" conducted jointly by IDLC and Policy Research Institute of Bangladesh (PRI).

The survey was revealed during a virtual conference held on Tuesday.

To assess employment impacts created by IDLC SMEs, the survey was conducted on among 782 sample enterprises.

IDLC which started SME financing from the year 2015 has 45 percent SME financing out of its total portfolio and total number of SMEs was around 14,000 in the year 2019.

Employment growth in sample enterprises from inception to 2019 has been large. Employment growth in all sample enterprises from inception in 1989 to 2019 was 105.7 percent, according to the survey.

Employment growth in sample enterprises those were incorporated between 2011 and 2015 was 91.8 per cent and annual average employment growth over the 6.5-year period was 14.1 percent.

The largest employment growth was recorded in the service sector with 174.2 percent and manufacturing 131 percent over the entire period from inception to 2019.

Dr Bazlul Haque Khondker, director of PRI presented the survey paper at the event when Dr. Ahsan H. Mansur, executive director of PRI and Arif Khan, managing director of IPDC were present.

Female enterprise owners have been found to perform better than their male counterparts. More specifically, employment growth in female-owned sample enterprises from inception to 2019 has been found at 146.2 percent significantly above the job creation rate at the male owned enterprises slightly over 100 percent, according to survey data.

Growth of employment in enterprises in the rural locations was 114.9 percent, slightly higher than

the employment growth in enterprises in the urban locations of 107.6 percent.

However, Covid-19 brought a break on the fast employment generation, putting SMEs in deep trouble which will ultimately hit overall employment generation in the country.

The bright picture completely reversed after virus outbreak as 30 percent to 40 percent SME borrowers could not pay back their money, said Arif Khan.

However, low cost stimulus will help them to early recovery, he hopped.