Funding women entrepreneurs is essential achieving SDGs

Bangladesh is a progressive nation with a burgeoning development landscape. The possibility of women entrepreneurs thriving in our country is exceptionally bright. With necessary support, female entrepreneurs can contribute even more to national economic development by nurturing their innovative talents. According to the 2013 Economic Census, there were around 7.8 million enterprises in Bangladesh, with only about 7 and half being women-owned. However, with the right assistance, women entrepreneurs have the potential to significantly enhance the nation's economic progress. We are eagerly awaiting the upcoming census. Over the past 11 years, not only has the number of entrepreneurs in the country increased, but the number of women entrepreneurs has also significantly risen. There is no doubt that the growth of female entrepreneurs has been extensive. According to some opinions, the current rate of women entrepreneurs in the country is 20%. According to others, this number might be even higher.

Leaving aside statistical arguments, we can say that women's participation in the country's economic development is gradually increasing. The collaborative efforts of women and men can lead to the advancement of a nation's economy. Expecting sustainable development without empowering women is not feasible. One of the goals of Sustainable Development Goals (SDGs) is to ensure that no one is left behind in development initiatives. The current government has been working on women's empowerment to achieve the SDGs' objectives.

There was a time when the rate of women employees in government institutions was significantly low. However, nowadays, the number of women employees in various government establishments has noticeably increased. Many of them are fulfilling responsibilities at the highest levels of various institutions with competence. Currently, even 12 secretaries are women. Women have proven that when provided with opportunities, they can contribute significantly to national economic development. Women are achieving good results in various levels of education sectors. Consequently, they are creating opportunities for employment in various government and non-government institutions. Many are showing interest in entrepreneurship or self-employment, establishing various enterprises. Currently, the women entrepreneurs or employees in different institutions are knowledgeable in modern information technology. As a result, they can compete with men and sustain themselves in the workplace.

When we have worked with women entrepreneurs, we have observed that there are three categories of women entrepreneurs in our country. One category consists of entrepreneurs from affluent backgrounds. They often become entrepreneurs due to the continuity of family tradition. Some of these enterprises may have grown significantly. Family members are typically involved in these enterprises, with husbands assigning responsibilities to their wives or brothers involving their sisters in managing multiple enterprises. Women in these enterprises are managing them with great skill. They receive support from their families in running businesses or factories. In some cases, women entrepreneurs themselves have established large-scale enterprises. Then there is another category of women who have become entrepreneurs due to circumstances. Perhaps their husbands have passed away or the family has faced financial difficulties. There is no arrangement in place for managing the family's financial expenses. At one point, they took the initiative to become entrepreneurs or businesswomen to manage the household expenses themselves. They usually start managing businesses or factories with minimal capital. Since these women typically lack prior experience, establishing themselves as entrepreneurs requires considerable struggle and effort. They often start with small-scale ventures and gradually expand. However, due to their circumstances, very few of these women entrepreneur transition to larger enterprises in the future. Some of them become established, but many face challenges along the way. Then there is another category of women entrepreneurs who have been striving to become entrepreneurs since their educational life. They are well-versed in modern information technology, which enables them to perform exceptionally well. They are quite adept at facing challenges. Those who aspire to become entrepreneurs from their student life tend to possess highly creative talents. If they are provided with the necessary support and cooperation, they will undoubtedly excel in the future.

When we studied at the grassroots level, we observed that there are four types of needs for women entrepreneurs. Their most significant need is often financing. Even though they may have the potential, many women entrepreneurs cannot arrange the necessary financing from their families to establish or manage industrial enterprises or businesses at all times. We have seen many women entrepreneurs who, despite having great potential, have failed because they could not arrange the necessary financing due to various reasons. When women entrepreneurs approach banks for loans, they often do not show much interest in providing them with financing. Banks may lack confidence in women entrepreneurs. In most cases, banks require collateral to grant loans. However, it is often not possible for women entrepreneurs to provide collateral. Banks discourage women entrepreneurs from taking loans in various ways. However, various research studies have shown that women entrepreneurs are generally less likely to default on loans. They tend to repay loan installments more regularly compared to male entrepreneurs.

Another major problem for women entrepreneurs is the lack of appropriate training in their respective fields. In our country, there is a shortage of an adequate number of training institutes on a need-based basis for providing training to entrepreneurs. There is no substitute for training to achieve success in any field of work.

Another significant problem for women entrepreneurs is the insufficient access to information. Women entrepreneurs often gather information about local markets, products, and other subjects from people around them. However, many of those who are emerging as women entrepreneurs nowadays are highly educated and comparatively aware. They can collect information through various means, especially using Google, where they can easily access any information. These problems have persisted for a long time. Initiatives can be taken at the national level to address these issues.

In various aspects of accessing policy support as well, male entrepreneurs tend to utilize it more in most cases. Although some female entrepreneurs also have access to policy support, they may not effectively use it to seize opportunities to compete. It has been observed in a study that the scope of business or industry for female entrepreneurs is relatively smaller, and they often handle many tasks themselves, which allows them less time to complete regulatory matters such as obtaining trade licenses or renewals compared to men.

There is no difference between male and female entrepreneurs in terms of policy-related assistance. Rather, the government is keen on providing more support and assistance to female entrepreneurs to foster the creation of more female entrepreneurs. Some tax-related benefits have been provided to female entrepreneurs. However, in reality, most of these benefits remain largely unused due to procedural complexities. For example, female entrepreneurs are not obligated to pay corporate tax until their annual turnover reaches 7 million Taka. Another benefit is that those with an annual turnover of less than 5 million taka are not required to register for VAT. That means, according to section 2(48) of the Value Added Tax and Supplementary Duty Act, 2012, the VAT exemption threshold is set at 5 million Taka. However, due to General Order No. 17/MUSHOK/2019, most businesses are being obstructed from availing this exemption benefit, and at the field level, VAT officials are enforcing VAT payment on all businesses. Through this order, instructions have been given to provide VAT exemption to 162 categories of goods and services without turnover threshold. In sectors such as toffy, chewing gum, nails, and services like beauty parlors, sound and lighting equipment rental agencies, providing VAT specifically for turnover-exempt small entrepreneurs poses significant challenges.

In 2022, this order was amended, adding two more services (e-SIM and thermal vessel service) to it (General Order No. 06/Musak/2022). Many small entrepreneurs, such as biscuit makers, pickle producers, printing presses, sweetmeat vendors, beauty parlors, nails, plastic goods, and wood products manufacturers, are included. Therefore, female entrepreneurs are not benefiting from the registration and VAT-related facilities. We have repeatedly requested the National Board of Revenue to address this inconsistency. However, they have not taken any action on this matter yet.

Bangladesh Bank has many refinancing schemes in operation. There are some refinancing schemes where women entrepreneurs are given priority. Even our industrial policy says that at least 15 percent of the total funding should be given to women entrepreneurs. But the banks are not able to give 15 percent of total loans to women entrepreneurs. Because in the rules and regulations of the bank, women entrepreneurs are not considered eligible for getting loans. Most of the women entrepreneurs are not able to comply with the new rules to get a bank loan. In particular, bail must be given. Most of the women entrepreneurs do not get loans from banks as they do not have collateral.

Another issue is that sometimes announcements are made regarding a fund of perhaps 100 crore Taka for the 'Cottage, Micro, Small, and Medium Enterprises' (CMSME) sector entrepreneurs. Initially, the fund is allocated to medium-sized entrepreneurs, then to small entrepreneurs, and finally, whatever remains is left for cottage and very small industry entrepreneurs. There isn't much distinction between medium and large industries. We have repeatedly urged the authorities of the Bangladesh Bank that if they truly want to support small entrepreneurs, then a separate fund is necessary for cottage and micro-industry entrepreneurs. Currently, a collateral-free credit guarantee scheme has been launched through which cottage, very small, small, and medium-scale industries can access loans. In this regard, Bangladesh Bank has also taken a commendable step by establishing a Credit Guarantee Department. If it functions properly, although some financial problems may still exist, they can be resolved.

Although directives have been issued in industrial policy to provide women entrepreneurs with various privileges, there is a lack of sincerity in implementing those directives. Especially when it comes to providing collateral-free loans to women entrepreneurs, it is not being realized in most cases. As a result, women entrepreneurs are facing difficulties in obtaining institutional financing. During the COVID-19 pandemic, we have seen instances where a female entrepreneur in the Khulna region has been struggling just to obtain a loan of 40,000 Taka. However, the bank did not approve her loan request. Even the announced incentive packages have not been effectively utilized in many cases. For small women entrepreneurs, who can start production activities with minimal investment.

It is necessary to identify the potential female entrepreneurs in various sectors and arrange appropriate training and financing for them. By doing so, female entrepreneurs can develop and contribute to the country's economy. Providing financial and policy support to female entrepreneurs can enable them to emerge as successful entrepreneurs. Creating opportunities for extensive employment in their enterprises can also be beneficial. It has been previously stated that female entrepreneurs are generally not defaulters in loan repayment. They regularly repay the installments of the loans they receive, which ensures the safety of the bank's loans if the bank provides loans to female entrepreneurs as per their demand. To ensure whether the economic assistance provided by the government for female entrepreneurs reaches the beneficiaries properly, effective measures need to be taken. For this, monitoring mechanisms need to be strengthened.

Even though the policy guidelines state that no collateral will be required for loans up to 25 lakh Taka for female entrepreneurs, this is not effectively implemented in practice. I have seen very few female entrepreneurs who have received loans without collateral. Measures need to be taken to ensure that female entrepreneurs can access loans without collateral. In our country's current economic and social situation, providing collateral for a female entrepreneur is often not feasible. As a result, many potential female entrepreneurs are unable to access financing from banks. Without financing, they are unable to expand their businesses. Furthermore, instead of limiting the loan amount to 25 lakh Taka without collateral, it could be increased to 50 lakh Taka if the entrepreneur invests in the right place and the financing institution assesses the investment correctly.

Female entrepreneurs often face difficulties when obtaining loans from banks. To access loans, a female entrepreneur must have a trade license. However, many small female entrepreneurs do not have trade licenses. As a result, they are unable to obtain loans from banks. Many female entrepreneurs possess innovative talents, utilizing them to produce various goods and services. However, they lack experience in improving the quality of their products, marketing their products effectively, and other aspects of business management. Consequently, they encounter challenges in marketing their products in the market. Producing a product solely for the domestic market may not fully utilize the potential of production. It is essential to explore opportunities for exporting products to the international market alongside the local market. Therefore, having a good understanding of the international market is necessary. Currently, those who have received higher education and are small entrepreneurs find it easier to keep track of the international market situation.

In recent times, especially during the COVID-19 pandemic, e-commerce businesses have created significant opportunities. There is still great potential in the e-commerce sector. However, e-commerce entrepreneurs often face difficulties obtaining financing from banks because they encounter challenges in obtaining trade licenses. In this context, although DBIID (Digital Business Identification Number) has been introduced for commercial purposes, it is still not considered as an alternative to trade licenses. This issue needs to be addressed. Half of Bangladesh's total population are women. Therefore, any development effort excluding them may not succeed. I reckon, that creating a supportive environment for women entrepreneurs is essential in our country. There is a need to bridge the gap between government policies and their implementation in this regard.

Author: Economist and Chief Executive, Business Initiative Leading Development (BUILD)
Transcribed by: M A Khaleque