Economic Barriers · Economy of Bangladesh · Quality of Bangladeshi SME Products · Self Employment · Small and Medium Enterprise (SME) · SME Cluster Development · SME Cluster Development in Bangladesh · SME Clusters in Bangladesh · SME Development

Digitisation of SMEs – Opportunity or Challenge

Digitisation of SMEs – Opportunity or Challenge

Md. Joynal Abdin

Daily Sun, 15 February 2017

 

The small and medium enterprises (SMEs) are considered as the most significant part of an economy. They are labour intensive and low capital investment in nature. Due to their labour intensive feature they used to contribute more in employment generation and assist the government to fight unemployment. SMEs are the mother of heavy industries and the backbone of the economy. In many countries, SMEs are the feeder organisation of large corporations. Big branded companies used to get part of their products from SMEs through outsourcing or subcontracting.

SMEs are a significant part of the product’s value chain in those economies. Till now subcontracting / outsourcing business has not being popularised / formalised / institutionalised in Bangladesh. As a result value chain concept of product manufacturing has not developed here in the real sense. Outsourcing concept started its journey in readymade garment sector during the last few years. But it is not widely practiced method in any other sector in Bangladesh.

Global business environment is changing its dynamics every day. Rapid development of science and technology is supplying fuel to the movement of business dynamics changing motion. For example, if we look back to one decade we will see that SMEs were using record books with pen or pencil for keeping record of materials or financial transactions. Using postal / courier services to send documents were the only means. Physical visit was necessary to test a raw material’s quality and final decision of purchase. But today, within a decade, big revolution happens in this arena due to the rapid progress of information and communication technology. Today sophisticated computerised record keeping is available at affordable cost. Internet communication changed the dynamics of manual communication and physical presence became unjustified here. Email communication replaced the postal or courier services, video conferencing technology ensured audio visual communication without physical presence, mobile communication has just created a revolution in this sector. Robotics with artificial intelligence made the previous dynamics completely irrelevant within this one decade. We do not know what the next miracle is waiting for us in the coming decade(s).

With the advancement of science and technology industrial community adopted the best possible solutions and ensured justified progress of the sectors as required. For example, steam engine was invented in 1780s and business factories started to mechanise themselves with water power and increase productivity at highest rate at that time. With the invention of electricity in 1870s manufacturing assembly line concept was initiated by the entrepreneurs with the use of electricity and productivity increased into the next step. Later on they adopted computerised automation concept while computer was invented in 1969. Similarly today in 2017 industrialists are fighting to adopt digital technologies for digitisation of respective enterprises by using cyber physical systems, robotics with artificial intelligence even the 3D printing technologies for ensuring productivity, products quality, and well acceptance of the consumers.

Now come to the point how many SMEs are capable of adopting all these new technologies in terms of Bangladesh? How much modernised our SMEs are? Whether rapid progress of technology is an opportunity or a threat to the Bangladeshi SMEs?

I have the opportunity to visit SMEs throughout the country. I have optimistic observation regarding the enterprises located in Dhaka, Chittagong, and other divisional cities or BSCIC industrial areas. I found them at least updated to the millennium technology or later. But in most of the cases SMEs located at old clusters or district level are lagging behind in terms of technology up gradation. As a result they are losing market share and becoming sick. With those old fashioned technologies of the 1970s SMEs are less productive, product qualities are not up to the expectations of buyers, product designs and shape are too old. They are unable to diversify products due to technical limitation. They are unable to enter the new segment of market due to lack of knowledge. They are just waiting for death. I saw this measurable situation in coconut oil cluster at Bagherhat, in few cases the story is similar to some SMEs of Bogra light engineering cluster, Cox’s Bazar ship building cluster, Rangpur satoronji cluster and many jewellery or pottery clusters all around Bangladesh.

According to a recent report (November 2016) of the World SME Forum, it is expected that the global B2B trade of SMEs will be USD6.7 trillion by 2020 and B2C trade will be USD3.2 trillion by this time. That means a bigger opportunity is waiting for Bangladeshi SMEs to be a part of that bigger cake and capture a reasonable share of it. But, question is that could we think about our readiness to grab this opportunity? Are Bangladeshi SMEs ready with quality products and world class services in their basket? How much share is our target? What are the preparatory activities we have to finish up by this time?

To analyse current scenario of Bangladeshi SMEs we will find out that till now Bangladeshi SMEs do not have access to global market; they are disconnected from global value chain. We do not have information about global market demand of our products and current available supply chain. What are the standard we have to comply with labour, environmental, social, and quality standards to grab a justified share of that market?

Bangladeshi SMEs are suffering from scarcity of skills required in various specialised fields. Those are suffering from limited availability of managerial skills, specialised skills such as technology and language that are crucial for reaching global markets. Finally, SMEs are suffering to get formal bank loans with competitive rate of interest.

Digitisation and expansion of ICT skills could offer a very unique solution to most of the above mentioned challenges. For example, an SME entrepreneur or manager could easily identify global demand of his / her product by using ITC Market Access Tools from his / her office or residence. They could at least identify what types of skills is required to improve their capacity and which institutions home or abroad are offering these skills for students or professionals by using internet. They could easily collect information of SME loan products offering by different banks by searching into respective website. They could search buyers from global business directory by becoming members of respective network online. Thus we could see that ICT / digitisation is an opportunity for the SMEs but they have to be trained up accordingly to utilise this opportunity.

The government could play a very vital role in training entrepreneurs / professionals / upcoming professionals about how to utilise ICT tools to collect required information and from where; because another recent study shows that, ICT skilled SMEs are making 13% more revenue than that of an ordinary SME. They are getting 10% more buyers than that of the ordinary ones. That means we have knife in hand but that needs to be sharpened. The government has to come up to provide this sharpness to the SME entrepreneurs / professionals of Bangladesh for making them globally competitive. To digitise SMEs internet bandwidth should be free or with a minimum cost. Internet speed is required for satisfactory performance of outsourcing / freelancing sector. Few adjustments are required in banking sector for making them SMEs friendly. Thus the government, yes it is government that can bring the change and promote the revolution for economic liberty of Bangladesh by 2021.

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