IIDFC-NSIC MoU signed to utilise Indian know-how in revamping SME sector
Industrial and Infrastructure Develo- pment Finance Company (IIDFC) of Bangladesh and India’s National Small Industries Corporation (NSIC) Tuesday joined hands to utilise Indian experience and expertise in developing the country’s ailing small and medium enterprises.
The IIDFC and NSIC, a focal point of development of SMEs in India, signed a memorandum of understanding (MoU) at the company headquarters in the city. The deal is expected to pave the way for setting up of an IT village.
Under the agreement, NSIC will extend all cooperation, assistance and expertise to facilitate development of SME’s, especially in the engineering, electronics and other non-traditional sectors.
NSIC would also assist in replicating technical services centres for cluster of industries in Bangladesh.
The signing of the MoU will put the country one step ahead towards achieving the channel investment of Tk 240 billion by banks and non-bank financial institutions through cluster approach for SME growth and development, IIDFC officials said.
IIDFC chairman Motiul Islam chaired the ceremony while Dr Mashiur Rahman, economic adviser to the Prime Minister, Atiur Rahman, governor of Bangladesh Bank and H P Kumar, chairman of NSIC, spoke.
Atiur Rahman said, “It would be depressing if we compare NSIC to Bangladesh Small and Cottage Industries Corporation (BSCIC) as India has developed a lot in the sector. We have to cross the hurdle and move forward.”
He said the country is now fixing the institutional framework needed for the development of SMEs. “We have already set up an SME Foundation and adopted loan policies and programmes. But we have to act fast as we cannot afford to wait any longer.”
The governor said the central bank is playing a proxy role in flourishing SMEs. “Our SMEs can do far better if we can give them financial and technological facilities. Bangladesh Bank is also encouraging banks to prepare linkage programmes.”
He said the borrowing cost has gone up because the country does not have any entrepreneur rating.
Mashiur Rahman said the SME sector is crucial for the country’s economic advancement, as it adds value and employment. “Large investment involves more risks. Conversely, the small and medium entrepreneurs invest within their limits.”
He said the MoU between IIDFC and NSIC would be the first venture between India and Bangladesh since the two countries signed a joint communiqué in January this year.
Mr Kumar said lack of information is a key barrier to the development of SMEs. “Non-banking financial institutions can act as a bridge between banks and micro and small entrepreneurs for the development of the sector as banks need good customers and customers need financing.”
Motiul Islam said one of the limitations for the expansion of SME sector to its optimum level and to exploit its full potentials is lack of knowledge.
“Sectors such as light engineering, auto components, electrical and electronics lack viable project profiles, trained manpower and marketing skills,” he said.
India’s SME sector accounts for about 40 per cent of its industrial output.
Mr Islam said introduction of Bangladesh Bank’s refinancing scheme for SMEs at 5.0 per cent interest had given a new impetus for growth of the sector in Bangladesh.
“Development of SME must be diversified and new areas should be identified,” he said adding that a tie up with NSIC would be useful for implanting Indian experience to Bangladesh.
He said Bangladesh has to develop the concept of cluster approach for SME growth.
Officials said under the agreement incubation centres would be set up to figure out suitable locations for SMEs.
“Bangladesh’s micro and small entrepreneurs manufacture products, but they do not know where and how to market the produce. This will be crucial if they go for large scale production for exports,” said IIDFC Managing Director Md Asaduzzaman Khan.
“The agreement will enhance information sharing, marketing and technology transfer. This will pave the way for setting up of an IT village in the country,” he said.