Bangladesh’s 11.7 million small and medium enterprises (SMEs) continue to operate far below their potential largely because of the absence of reliable data systems linking businesses with finance, markets and investment opportunities, a gap that experts say is holding back productivity, formalisation and economic growth.
Despite having more than 13 times as many SMEs as Vietnam, Bangladesh’s SME sector contributes only about 27 per cent of gross domestic product, compared with around 50 per cent in Vietnam.
Analysts said that the difference lies not in entrepreneurial capacity or market demand but in the limited use of data intelligence to support business decisions, lending and market expansion.
Data intelligence refers to the collection, integration and analysis of business information to improve access to finance, identify market opportunities and increase operational efficiency.
In sectors such as garments, agro-processing, light engineering, retail trade, logistics, e-commerce and cottage industries, transaction records, sales data, digital payments, utility bills and supply-chain information can help businesses secure loans, forecast demand, manage inventories and expand production.
However, more than half of Bangladesh’s SMEs remain informal, operating without audited accounts, tax records or verifiable financial statements.
According to the Bangladesh Bureau of Statistics (BBS) 2024 data, out of the total 11.7 million SME firms, 3.28 million (28 per cent) are formal, while 7.55 million (64.59 per cent) are informal.
As a result, many businesses cannot demonstrate their creditworthiness to banks despite being commercially viable.
Md Main Uddin, professor and former chairman of the Department of Banking and Insurance at the University of Dhaka, told New Age that the lack of reliable data and the high level of informality remain two of the biggest obstacles to SME development in Bangladesh.
He said that many SMEs operate without verifiable financial records, making it difficult for banks and investors to accurately assess their financial condition, business performance and repayment capacity. As a result, many potentially viable businesses fail to securefinancing.
In many cases, financial institutions rely on third-party information, which can be costly, incomplete, or even manipulated, increasing lending risks and discouraging investment.
He stressed the need for a credible and comprehensive SME database, although establishing such a system would be challenging.
The International Finance Corporation estimated Bangladesh’s MSME financing gap at $2.8 billion in 2023.
The lack of reliable business data prevents financial institutions from accurately assessing risk, forcing many entrepreneurs to depend on costly informal borrowing instead of formal bank credit, experts said.
Consequently, firms remain outside the formal financial system and depend on costly informal borrowing, and continue generating little usable information, they said.
The challenge is compounded by fragmented digital infrastructure.
Although millions of transactions are conducted digitally every day, the information is rarely integrated into a unified system that can support credit assessment and business development.
Masrur Reaz, founder and chairman of Policy Exchange Bangladesh, said that most micro and cottage enterprises remain entirely informal, while many small and medium-sized firms are partially formalised through business registration and tax identification numbers.
He said that many entrepreneurs avoid formal registration because they fear additional regulatory requirements and tax obligations.
To encourage formalisation, the government could offer temporary regulatory and tax relief for newly registered enterprises for at least three years.
Reaz also emphasised the need for a unified national database to accurately assess the sector’s condition and design appropriate policy support.
Mobile financial service providers, banks, fintech companies and government agencies maintain separate databases with limited interoperability.
Bangladesh’s draft National AI Policy for 2026-2030 seeks to address the problem through a Bangladesh National Digital Architecture and a National Data Exchange that would enable standardised sharing of financial and identity data across institutions.
The policy also highlights the need for comprehensive data protection legislation, which remains absent.
Another challenge is the digital divide. Smartphone penetration reached 72.8 per cent in 2025, but internet access in rural areas remains below 38 per cent.
This limits the ability of rural enterprises, particularly in agriculture and agro-processing, to benefit from digital business services and data-driven financing.
In terms of geographic distribution, 7.39 million SMEs (63.11 per cent) are located in rural areas, compared with 4.32 million (36.9 per cent) in urban areas, according to BBS data.
SME Foundation managing director Anwar Hossain Chowdhury said that stronger market research and better information sharing are essential to help SMEs identify demand trends and business opportunities.
He noted that the SME Foundation is currently working with the Bangladesh Bureau of Statistics to update SME cluster mapping nationwide, as many new clusters have emerged since the last mapping exercise in 2013 while others have disappeared.
Experts said that Bangladesh can unlock significant SME growth by expanding digital payments, integrating financial databases, encouraging electronic bookkeeping and creating alternative credit-scoring systems based on transaction histories rather than traditional collateral requirements.
Several local fintech firms are already using mobile payment records, e-commerce transactions and utility payment histories to assess borrowers.
Similar models in India, Kenya and Pakistan have expanded access to credit for previously underserved businesses.
PKSF managing director Md Fazlul Kader said that the shortage of quality data continues to constrain the growth of the CMSME sector.
He called for the development of a unified digital platform providing real-time market intelligence, demand forecasts, export opportunities and product-specific information.
Such a platform would help entrepreneurs make better production, investment and marketing decisions.
Many entrepreneurs do not know where demand exists or where they can secure the best prices. Technology can bridge that information gap, he said.
