Sanowar Hossen, right, is the managing director of SKS Sweater Training Centre, left. The young entrepreneur says the access to SME loans is still not too easy. Photo: STAR

A tiny factory he runs for now. But there is a dream in his eyes.

And it is turning his present unit that could engage 18 young people in manufacturing sweater into a big one in a near future.

This is Sanowar Hossen. He appears to be too young to become an entrepreneur. Still in his 30s, Hossen is the managing director of SKS Sweater Training Centre.

Located at Hizal Hati of Baroi Para under Kaliakoir of Gazipur district, around 50 kilometres off Dhaka, SKS Sweater was set up just eight months back with only two machines. Two months later, in March this factory went into production. At that time it earned another two machines.

Capitalising on his 13-year experience as a sweater worker and his zeal, Hossen ventured into the risky business. The capital base was a meagre amount of Tk 40,000.

"Now I am running the factory on subcontract basis at minimum Tk 20 a piece. Our daily production capacity is 250 pieces," the small entrepreneur said.

Relationships with some large factories he once worked for have helped him a lot to get work orders, Hossen went on.

He also pointed out that his business did not witness any recession fallout to the extent he heard from others.

But a hurdle he has to overcome to translate his dream into a reality. The hurdle is finance. Easier access to bank finance could make his business expansion plan a success, says Hossen, a secondary school certificate holder.

He wants to develop his factory. Installation of at least 400 machines in the unit is his dream. He will leave no stone unturned to get it done, Hossen expresses his firmness.

Already he has contacted a private bank, but it declined to lend him without collateral. The situation might force him to knock the doors of micro-financiers.

"The private bank I have talked to is reluctant to lend me without mortgage, particularly land," Hossen says. He further says such attitude from a bank with whom he maintains an account has frustrated him a little.

"Now I am trying to borrow from a nongovernmental organisation at a much higher rate," he discloses.

This non-accessibility of finance to small and micro entrepreneurs remains a severe problem for years in the country.

Commercial banks often do not pay heed to the simultaneous pressure both from the central bank and finance ministry for lending to small and medium enterprises (SMEs) without collateral or mortgage. Banks are also blamed for imposing higher interest rate for SMEs, the growth of which in terms of size and number has a multiplier effect on the national economy, specifically on employment, economic growth and poverty reduction. The sector is also considered a highly cost-effective and socially desirable road to industrialisation in Bangladesh. According to a study of Bangladesh Bank, investment cost per person employed in large industrial units is 78-100 times more than it costs in the case of a worker at an SME.

Another main feature of the SME sector is its capital investment return. Such return is above 30 percent compared with 13 percent for the medium enterprises. Operating profit for SMEs is 12 percent, which is higher than in some industrial countries, the BB study shows.

In the past, the government attempted to ease loans for SMEs by targeted lending. It made directives to banks that a certain share of loan portfolio was to be earmarked for small and cottage industry financing. The government also set up Bank of Small and Cottage Industries (BASIC) in 1988 with the objective of financing small and cottage industries. However, many point to the fact that this specialised bank had failed to serve the purpose of easier access to finance.

Afterwards, several commercial banks have come forward, mainly in papers, with special packages for SME development.

The Bangladesh Bank is also providing refinance facilities by using its own fund as well as channelling funds under International Development Assistance by World Bank, and from Asian Development Bank.

But it did not work to the expected level.

Another study by SEDF shows that SMEs have limited access to bank financing. It recommended funding at reasonable rates with suitable repayment schedule. The study also stressed removal of bureaucratic tangles.

It also shows that about two-thirds of the SMEs did not approach banks for working capital loans due to this bureaucratic tangle. It takes about two months on an average to have a loan sanctioned, the study finds.

Fazlul Hoque, president of Bangladesh Knitwear Manufacturers and Exporters Association, thinks fund constraint is a major barrier to the SME growth.

"Many small enterprises have been stuck in the same situation for years. Some even faced closure because of their inability to bear the operational expenses," said Hoque, who represents the country's largest export sector. Knitwear exports stood at $6.24 billion in fiscal year 2008-2009.

Despite all odds, Jarina Akter, 24, young entrepreneur Hossen's wife, is upbeat on her husband's fortune.

Akter, who works 10-12 hours a day in SKS Sweater, says that day will definitely come when their dreams will be materialized.

Every time she walks past HAESONG, a giant Korean sweater factory located within 20 yards away of her husband's tiny one, she recalls Sanowar's dream.



sajjad