“Lead Enterprise” led Capital plus Model can help rural small businesses to develop into a sustainable enterprise.

As of 2018, Bangladesh has lot of be proud of. We have recently graduated from low income economy to the lower rungs of middle income nation with expectation by 2021 will be a mid-level economic country. As per World Bank report, Bangladesh have maintained a positive GDP growth rate that is second in the region, with a GDP of ~US $ 200 billion, 34th largest economy and is one of the fast-growing economy with having heavy high density in population (total 160 million), poised to be the next Asian Tiger. A combination of multiple positive factors that favor continued strong economic growth –a steady inflation rate of 5-6% in the last five years, and a record high FX reserve of USD 33.5 billion. With a GDP growth rate of 7.3% in the fiscal year 2016-17, the economy has kept up an impressive annual average growth rate of more than 6% over the last ten years.

Despite of above positive factors, still almost 75% (120 million) of the population live in rural areas, where the electrification rate is 42%, almost 90% of people use traditional biomass for cooking, agriculture contributes 20% to Bangladesh’s GDP and employs 45% of the workforce. But if we look around the current landscape of rural economy of Bangladesh, young people are still struggling, there aren’t enough decent jobs. Those, which are available are low-paying, physical demanding, and unfulfilling. Resulting too many young people are leaving their family farms to seek work in overcrowded cities. If they can’t find opportunities at home, what choice do they have? What choice would you or I have, in their place?

Similarly, small businesses (Micro, Small & Medium Enterprises) are the key drivers of the economy, contributes 25% in GDP and employee nearly half of the total working people.

But, overall MSMEs development support ecosystem is still underdeveloped with a handful of services and misaligned incentives. Ag-MSMEs receive little market-relevant business development support, practical opportunities to accelerate growth, and opportunities to link with growth-orientated funding facilities. Additionally, MSMEs are often unaware about the latest Ag-techs, have minimal understanding of forward market dynamics and operate via extractive business strategies.

On the other hand, 88% of the farm households (as micro enterprises) are marginal, farming between 0.05 to 2.49 acres, and has very limited access to technology. And while farmers are developing their “How to Produce” skills, “How to Sell” skill remains a challenge.

In addition of above, absence of adequate storage infrastructure, multiple value chain actors between original producers and end-consumers, absence of quality inputs and limited facility in extension services.

Most importantly, when it comes to access to finance (A2F) for MSMEs, it is found that the market is largely concentrated with informal sources followed by traditional MFIs (Micro Finance Institutions) and formal financial institutions often focus on urban, less rural. Moreover, limited role of banks/NBFI, unless risks covered. Other finance providers are also limited role in agriculture/SMEs. Many donor-backed programmes, though rarely tie business development with credit; often facing project management versus enterprise development dilemmas. Resulting, huge gap in access to finance for rural enterprises and smallholder farmers. Outside enterprise finance, credit provided directly to farmers typically by credit unions, microcredit, informal providers (very high interest rate);

Beyond finance, there are some key constraints that also need to be addressed:

  1. Low entrepreneurial skills & access to business support;
  2. Poor business models explain lack of investment readiness;
  3. Social factors, i.e. gender discrimination, women care work burden and women less mobility;
  4. Poor collateral, high transaction costs;
  5. Absences of suitable loan product that suits the nature of small businesses particularly agri-based enterprise.

On the above backdrop, Enterprise Café Ltd @ SME Café has brought “lead enterprise” led capital plus, a unique business model, to promote access to finance (A2F) and access to market (A2M) for rural based small & growing businesses to develop  into a sustainable enterprise.

SME Café, facilitates and offers of different financial and non-financial or even tailored made technical support to entrepreneurs (MSME), who are looking for funding or facing challenge to arrange or manage adequate fund for running their venture smoothly and investors wanting to invest in a impactful or purposeful project/ enterprise (financially viable and having social positive impact with no adverse environmental impact).

SME Café is being collaborated with formal financial institutions (Bank/NBFI, Insurance Company), multiple innovation, technical partners, BDS providers, individual investor(s)/ lender(s) and venture capital (VC) firms (foreign and domestic) to boost the MSME development ecosystem and rural economy in Bangladesh.

SMEs Café focus on creating meaningful connections for startups, growing ventures and investors/ lenders. Both startups (venture) and investors will have the opportunity to pitch, connect and learn to inspire new investments and long-term relationships.

SMEs Café, “Lead enterprise led Capital plus model lies in developing an integrated approach to solve this and is particularly interesting as it bridges the MSME gaps in all four major fronts – access to finance (working and fixed capital, insurance), increase business capacity, access to latest Agri-tech and advanced skill sets for tapping to forward market.

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