Report on Cluster-Based Development of SMEs in Bangladesh and Its Alignment with Sustainable Development Goals (SDGs)

Introduction

Despite the significant potential of cluster-based development of small and medium enterprises (SMEs) to contribute to Bangladesh’s economy and employment generation, the sector has not received adequate attention. This report highlights the current status, challenges, and opportunities of SME cluster development in Bangladesh, emphasizing its critical role in achieving the Sustainable Development Goals (SDGs), particularly SDG 8 (Decent Work and Economic Growth), SDG 9 (Industry, Innovation, and Infrastructure), and SDG 12 (Responsible Consumption and Production).

Current Challenges in SME Cluster Development

• Lack of Government Support: Limited prioritization and absence of dedicated budget allocations hinder cluster development efforts.
• Financial Constraints: Insufficient financial assistance and access to low-interest loans restrict entrepreneurial growth.
• Inadequate Logistical Services: Poor infrastructure and logistical support limit market expansion and product distribution.
• Skill and Quality Development Gaps: Need for enhanced skills development, product diversification, and quality control in production processes.

Role of SME Foundation and Stakeholders

The SME Foundation has been actively promoting cluster-based industrial development and market expansion within its capacity. Key initiatives include:

1. Cluster mapping conducted in 2013 to identify enterprises operating in similar industries.
2. Needs assessments completed in 90 clusters to identify development requirements.
3. Active support provided in 43 clusters focusing on:

• Entrepreneur development
• Product diversification
• Improved access to finance
• Linkage creation with larger businesses

These efforts align with SDG 8 by fostering sustained economic growth and productive employment.

Cluster Characteristics and Economic Impact

• Cluster Definition: As per the National Industrial Policy 2022, a cluster is a geographical area within a 5 km radius hosting 50 or more enterprises producing similar or related products.
• Cluster Distribution: Highest concentration in Dhaka, Rajshahi, Chattogram, and Khulna divisions.
• Raw Material Usage: 51% of factories use local raw materials exclusively, reducing import dependency and supporting SDG 12.
• Enterprise Scale: 177 clusters encompass approximately 70,000 enterprises with an annual turnover of around Tk30,000 crore.

Sectoral Focus Areas

Clusters under active development span diverse sectors, including:

• Leather
• Electrical and Electronics
• Light Engineering
• Pottery and Jewellery
• Furniture, Wood, and Bamboo
• Traditional Crafts (Nakshi)
• Handloom
• Hosiery Fashion
• Home Textiles

Challenges Faced by Entrepreneurs

Entrepreneurs in SME clusters encounter multiple challenges that impact sustainable development:

• Product marketing difficulties
• Limited access to appropriate financing
• Technological capability gaps
• Insufficient entrepreneurial skills
• Product quality concerns
• Poor working conditions and inadequate health and safety standards

Addressing these issues is essential to meet SDG 8 and SDG 9 targets by promoting inclusive and sustainable industrialization.

Stakeholder Perspectives and Recommendations

According to Anwar Hossain, Managing Director of the SME Foundation, cluster-based development can significantly enhance the SME sector’s contribution to the national economy if supported through financial aid and strategic cooperation.

Mirza Nurul Ghani Shovon, President of the National Association of Small and Cottage Industries of Bangladesh (NASCIB), emphasized the need for:

1. Government prioritization and long-term planning for SME cluster development.
2. Dedicated government budget allocations to support cluster initiatives.
3. Enhanced role of foreign missions and Economic Counsellors in promoting SME products internationally to boost exports.

These recommendations align with SDG 17 (Partnerships for the Goals) by advocating for strengthened collaboration between government, private sector, and international stakeholders.

Conclusion

Cluster-based development of SMEs in Bangladesh holds substantial promise for accelerating economic growth, generating employment, and promoting sustainable industrialization. Realizing this potential requires concerted efforts to overcome existing challenges through enhanced government support, financial assistance, skill development, and international market linkages. Such initiatives will contribute directly to achieving multiple Sustainable Development Goals, fostering inclusive and sustainable economic progress in Bangladesh.

1. Sustainable Development Goals (SDGs) Addressed or Connected to the Issues Highlighted in the Article

1. SDG 8: Decent Work and Economic Growth
   • The article focuses on the development of SMEs and cluster-based industries to accelerate economic growth and job creation in Bangladesh.
2. SDG 9: Industry, Innovation, and Infrastructure
   • Cluster-based industrial development, product diversification, and improving technological capabilities are key themes in the article.
3. SDG 1: No Poverty
   • By promoting SMEs and employment, the article indirectly addresses poverty reduction through economic empowerment.
4. SDG 17: Partnerships for the Goals
   • The article emphasizes the need for government support, strategic cooperation, and international marketing efforts to support SME growth.

2. Specific Targets Under Those SDGs Identified Based on the Article’s Content

1. SDG 8: Decent Work and Economic Growth
   • Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity, and innovation.
   • Target 8.5: Achieve full and productive employment and decent work for all, including young people and persons with disabilities.
2. SDG 9: Industry, Innovation, and Infrastructure
   • Target 9.3: Increase the access of small-scale industrial and other enterprises to financial services, including affordable credit and their integration into value chains and markets.
   • Target 9.5: Enhance scientific research, upgrade the technological capabilities of industrial sectors.
3. SDG 1: No Poverty
   • Target 1.2: Reduce at least by half the proportion of men, women, and children living in poverty in all its dimensions.
4. SDG 17: Partnerships for the Goals
   • Target 17.6: Enhance North-South, South-South, and triangular regional and international cooperation on and access to science, technology and innovation.
   • Target 17.9: Enhance international support for implementing effective and targeted capacity-building in developing countries.

3. Indicators Mentioned or Implied in the Article to Measure Progress Towards the Identified Targets

1. Number of SMEs and Clusters Developed
   • The article mentions 177 identified clusters and 70,000 enterprises, which can serve as indicators of SME sector growth.
2. Employment Generation
   • Job creation through cluster-based SME development is a key focus, implying employment rates in SMEs as an indicator.
3. Access to Finance
   • Indicators related to the availability of financial assistance, low-interest loans, and credit access for SMEs.
4. Market Expansion and Export Growth
   • Expansion of SME products to broader markets and increased exports, including foreign currency earnings, serve as progress indicators.
5. Product Diversification and Quality Improvement
   • Measures of product diversification and quality control improvements in SME clusters.
6. Technological and Skills Development
   • Indicators related to technological capability upgrades and entrepreneurial skills enhancement.
7. Government Support and Policy Implementation
   • Extent of government financial allocations and strategic cooperation for SME cluster development.

4. Table: SDGs, Targets and Indicators

Source: tbsnews.net