Bangladesh’s small and medium enterprise sector must rapidly adopt digital technologies, artificial intelligence and Fourth Industrial Revolution tools to become more productive, competitive and capable of creating jobs on a scale, SME Foundation managing director Anwar Hossain Chowdhury said.
In an interview with New Age, Anwar said that technology-led transformation, easier access to finance, improved market connectivity and decentralised institutional support would determine whether the country’s SME sector could realise its full economic potential.
‘Rapid technological advancement is fundamentally transforming global trade and commerce. Technology adoption is no longer optional for SMEs; it is essential’, Chowdhury said.
The government has already placed significant emphasis on technology-driven and innovation-based entrepreneurship in its FY2026-27 budget and policy priorities, he said, adding that the SME Foundation was aligning its programmes accordingly.
The SME Foundation was actively encouraging entrepreneurs to embrace digital transformation and AI-based solutions for their development in line with global trends, he added.
‘We are conducting various training programmes on digital transformation, AI and emerging technologies. Our goal is to ensure that entrepreneurs in rural and remote areas are not left behind. Technology adoption must be inclusive,’ he said.
According to SME Foundation Highlights 2026, micro, small and medium enterprises account for 99.92 per cent of all enterprises in Bangladesh, contribute 30.4 per cent to the sector’s overall GDP growth and create employment opportunities for 85 per cent of the total workforce.
The sector employs 30.63 million people, with most enterprises operating in rural areas.
Despite the progress, structural weaknesses remain significant.
About 64.59 per cent of economic units still operate entirely in the informal sector, leaving millions of workers and businesses outside formal regulatory and financial systems.
Female-headed units account for only 6.5 per cent of all MSMEs, while Dhaka division contains 27.1 per cent of all economic units and 33.3 per cent of the country’s 177 specialised industrial clusters.
Since its establishment under the Ministry of Industries in 2006, the SME Foundation has provided support through various programmes to nearly 22 lakh CMSME entrepreneurs across the country.
Anwar said that the foundation was organising training sessions, seminars and workshops through both physical and online platforms for developing skills on different sectors, and entrepreneurs were showing increasing interest in technology-based business practices.
‘We are not seeing any major resistance to technology. On the contrary, entrepreneurs are increasingly eager to learn. We are receiving strong demand for training programmes from different regions, mainly from rural areas,’ he said.
He, however, acknowledged that overall technological literacy is lower in our country which remained much lower among many grassroots entrepreneurs and that some still fear technology.
‘To overcome this challenge, we are expanding awareness programmes and training programmes through both physical and virtual platforms, and we are seeing encouraging results already,’ he said.
On digital infrastructure, Anwar stressed the need for uninterrupted internet connectivity and stronger digital infrastructure, saying that next generation technologies such as 5G and satellite internet services like Starlink could play a positive role in SME digitalisation.
He said that the SME Foundation was also making progress in establishing a centralised business-to-business digital platform.
Global e-commerce giant Alibaba has recently expressed interest in establishing a sourcing hub in Bangladesh, he said, adding that the Foundation aimed to act as a mediator between global technology infrastructure and local entrepreneurs.
The roadmap for SME development would rely on decentralisation and technology-driven progress, he said.
Establishing divisional offices, using AI-driven Industry 4.0 tools and expanding digital access for rural entrepreneurs could help reduce Dhaka-centricity, address unemployment and reshape the country’s trade landscape with competitiveness, he added.
Comparing Bangladesh with regional economies, Anwar said that SMEs contributed around 60 per cent to the GDP in China, 52 per cent in Sri Lanka, 50 per cent in Japan, 45 per cent in Vietnam, 40 per cent in Pakistan and 37 per cent in India.
In Bangladesh, SME contribution to GDP remains around 30 per cent.
‘We want to raise SME contribution to GDP from the current 30 per cent to 40 per cent within the next five years,’ he said.
Access to finance remains one of the biggest barriers for SMEs, according to Anwar.
‘Most grassroots entrepreneurs, who comprise around 70 per cent, are still struggling to access formal financing. They do not understand the structure of financing. Many lack basic documents such as trade licences and tax identification numbers, making it difficult for them to obtain bank loans,’ he said.
The Foundation is working with banks and financial institutions to simplify lending procedures, expand collateral-free financing and improve entrepreneurs’ financial literacy through training on documentation, bookkeeping and business formalisation, he added.
Anwar also called for reforms in SME banking.
‘Our small entrepreneurs maintain a loan recovery rate of around 99 per cent. Yet they face double-digit interest rates and complex procedures, while many large borrowers receive easier treatment. SMEs need single-digit interest rates,’ he said.
On export competitiveness, he stressed the importance of quality products and internationally recognised certification.
He said that local compliance standards, including those from the Bangladesh Standards and Testing Institution, did not have universal acceptance abroad.
‘Without globally accepted certifications, many SMEs cannot enter foreign markets. We are helping entrepreneurs obtain ISO certification through technical support and training on quality standards, compliant manufacturing and packaging,’ he said, adding that the foundation assisted 30 entrepreneurs in obtaining ISO certification during the last fiscal year.
The foundation has also submitted 697 policy reform proposals since 2011, of which 126 have been incorporated into national budgets or government policies.
Anwar also stressed the need for better market research and information sharing to help SMEs understand demand trends.
He said that the absence of a comprehensive SME database made evidence-based policymaking difficult.
‘We are working with the Bangladesh Bureau of Statistics to update national cluster mapping across the country. The previous mapping was conducted in 2013, and many new clusters have emerged while others have disappeared,’ he said. ‘A proper digitised database is essential to move away from guesswork and ensure targeted policy planning.’
He said the new SME Policy 2026 was being finalised with greater emphasis on technology adoption, innovation and decentralisation.
‘We want the SME Foundation to be decentralised so that services reach at the doorstep of entrepreneurs,’ he said.
The foundation has published 20 research books covering ICT adoption, informal enterprises, post-pandemic business recovery and industrial clusters, including leather goods, light engineering, agro-processing, furniture and fashion.
Digitalisation could improve access to markets and services, while AI and Industry 4.0 tools could enhance productivity and competitiveness, he added.
‘Technology adoption must be accelerated. The world is changing very rapidly, and we cannot afford falling behind,’ he said.
He also highlighted the need for stronger collaboration among the government, private sector and academia.
Through initiatives such as ‘Eso Uddyokta Hoi’ (let’s become entrepreneurs), the foundation is encouraging educated unemployed youth to choose entrepreneurship as a career, he said.
Anwar said that funding shortages and weak organisational capacity remained major institutional constraints.
‘SME development requires consistent budgetary support. Funding should not be sporadic; there should be dedicated annual allocations,’ he said.
Anwar also welcomed the proposed Tk 2,000 crore allocation through SME-support institutions in the proposed FY2026-27 budget, alongside allocations for Infrastructure Development Company Limited and Bangladesh Infrastructure Finance Fund Limited, describing the initiative as an important step towards expanding financing opportunities for entrepreneurs.
He also called for reforms in SME banking practices, saying that small entrepreneurs faced double-digit interest rates and complex bureaucratic procedures while large corporations often faced fewer hurdles.
‘Our small entrepreneurs are not loan defaulters; they maintain a 99 per cent recovery rate. Yet they face strict scrutiny while larger defaults go unchecked. We need single-digit interest rates for SMEs,’ he said.
The foundation conducts research on market trends, product demand and technology adoption and publishes research reports and training manuals to help entrepreneurs identify changes in domestic and international demand, he said.
It has carried out studies on ICT adoption among SMEs, informal SMEs, post-pandemic business recovery and industrial clusters, including leather goods, light engineering, agro-processing, furniture and fashion.
According to Anwar, 98 per cent of industrial establishments in Bangladesh fall under the SME category, making the sector vital for employment generation, industrial diversification and long-term economic growth.
He also stressed environmental sustainability, consumer awareness and effective policy implementation.
‘The challenge is not always policy formulation; it is implementation. We need greater awareness, accountability and coordinated action to ensure that SMEs can realise their full potential,’ he said.
