SMEs of Bangladesh: A critical study of Leather Industry

SMEs of Bangladesh: A critical study of Leather Industry

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RESEARCH PAPER

ON


Supervised By

RABEYA RAHAMAN

Lecturer

Department of Management Studies

Jagannath University, Dhaka.

Prepared By

SHAHRIYAR NAIEM

ID #: 07882509

Session: 2007 – 2008, 3rd

Batch





Date of submission: 7th July, 2013.


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1.1 Introduction

Small and Medium sized Enterprises (SMEs) have drawn a lot of interest among policy

makers, academics, businessmen and people in general. There is a broad consensus that a

vibrant SME sector is one of the principal driving forces in the development of the

economy of Bangladesh. SMEs stimulate private ownership and entrepreneurial skills and

can adapt quickly to changing market situation, generate employment, help diversify

economic activities, and make a significant contribution to exports and trade. Therefore,

policies and initiatives to develop SMEs and to increase their competitiveness are a

priority for Bangladesh. Liberalization of the economy along with rapid globalization has

posed severe challenges to SMEs not only in international market but also in the domestic

economy. Since SMEs are based on relatively small investment, their survival depends on

readily available market with easy access. In this context, access to finance, market

development and expansion as well as removal of other bottlenecks are a challenging

task, which requires coordinated efforts by individual business enterprises and the

government.

In Bangladesh, SMEs including micro enterprises comprise over 99 per cent of all

industrial units, contributing over 85 per cent of industrial employment. Focusing on the

10+ units, small units constitute 87.4 per cent, followed by medium and large units

comprising 5.7 and 6.9 per cent respectively. The micro, small and medium enterprises

(MSMEs) together employ a total of 31 million people, equivalent to about 40 per cent of

the population of Bangladesh, aged 15 years and above. More than three quarters of the

household income in both urban and rural areas are provided by the MSMEs (Rahman

2007).

There are different categories of SMEs in Bangladesh, therefore, the most important and

burning categories selected by government in industrial policy 2010 are-textile and

dyeing, leather and leather products, plastic product, hotel and restaurant, hospital/clinic,

poultry, rice mill, oil mill, bakery, wood and wood products, cosmetics and toiletries,

engineering metal products, printing and packaging, dairy, and saw mill.

Leather industry has a significant contribution on our economy and GDP. In Bangladesh

there are 220 tanneries, many footwear producing enterprises. They contribute in

employment creating, exporting products, and fulfilling local demand.


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Inspite of having most potentiality in SMEs in Bangladesh, there are many problems in

this sector especially in leather industry. Although government has recently taken few

promotional activities including re-funding them, giving importance on SMEs in

industrial policy-2010, creating positive environment etc. SME Foundation, Bangladesh

has done well for the development of SMEs.

This paper would, therefore, focus on the SMEs to determine the practical problems of

market access, policy needed, problems on development of SMEs. This paper also kept a

critical look on leather industry, its problem, recent scenario, contribution on economy

and its potentiality.

1.2 Background of the Report

The business world is getting dynamic and competitive day by day. It is hard for an

organization to run & even survive in a fast paced, growing and uncertain world if it

cannot keep tracks with the go of business dynamism. Business plays and links important

roles in developing the economy of a country. Businesses like Small and medium sized

enterprises (SMEs) are playing increasingly important role as engines of economic

growth in many countries including ours. SMEs provide low cost employment

opportunities and render flexibility to the economy. Many of the SMEs are engaged in

export activities suggesting that they are internationally competitive.

So, as a business graduate, I think I need to emphasize and be attached with such a sector

which has most important impact on our economy and we will get a handy & versatile

experience about the business world before starting our career.

Research paper submission is the arrangement, which makes a bridge between our

academic knowledge and practical world to have an acquaintance with the real business

world as well as to gear me up to lead the future competitive business.

I have visited fifteen SMEs in leather industry and collected information through

questionnaire. I have also assessed secondary data from various sources to make this


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paper. In this report, I have tried to make an overall analysis of SME and Leather

Industry.

1.3 Statement of the research problem with research questions

It is appear that Leather Industry should have got more importance than RMG sector.

Because all the raw materials of RMG sector, the highest contributor in GDP, are

collected from abroad, whereas, Leather Industry‟s raw materials (except chemicals) are

local. Furthermore, if we look at international market, China, larger leather product

producer and strongest competitor of Bangladesh, is moving rapidly in electronic market

leaving manual industry like leather, RMG etc. So there is a big opportunity for

Bangladesh to be best in leather industry. Considering those future opportunities, few

problems arise in the researcher mind. They are

What is the present condition of Leather Industry of Bangladesh?

Is Leather Industry of Bangladesh either ready or not for the future opportunities

(SWOT Analysis)?

What are the problems in facing future challenges?


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1.4 Review of Literature

With respect to the SME sector of Bangladesh, foreign and national experts undertook

some studies. Some of the notable ones are; Uddin (2008), Chowdhury (2007), Miah

(2007), Ahmed (2006), MIDAS (2004), ICG (2003), Hallberg (2002).

Uddin (2008) has stated that the economic efficiency and overall performance of the

SMEs especially in the developing countries are considerably dependent upon

macroeconomic policy environment and specific promotion policies pursued for their

benefit.

Chowdhury (2007) highlighted that in context of Bangladesh SME is characterized by

Low capitalization and limited assets, geographical diversity and high mortality, poor

credit knowledge, very limited access to formal source of credit, cash intensity in

transactions, very limited record keeping habit, poor financial disclosure on account of

tax issues, high risk perception has led to high borrowing costs.

In a study about SME sector of Bangladesh Miah (2007) stated that the major constraints

for SMEs are lack of adequate investment, lack of modern technology, high rate of

interest on bank loans, irregular/inadequate supply of power, poor physical infrastructure

and high transportation cost, poor information about market opportunities and

requirements, inadequate availability of raw materials, lack of skilled technicians and

workers, lack of research & development facilities, fierce competition, absence of

effective and transparent legal system, difficulties in accessing technology, credit

constraints, low access to business services, constraint of quality of human resources, low

awareness, low lobbying capacity, rapid changes in policy environment.

Ahmed (2006) observed that availability of finance is a major constraint to formation and

growth of SMEs in Bangladesh. Banks are reluctant to expand their SME credit portfolio

because they do not consider SME lending an attractive and profitable undertaking. This

is so because SMEs are regarded as high risk borrowers because of their low

capitalization, insufficient assets and their inability to comply with collateral

requirements of the banks. Administrative costs are also higher because close monitoring

and supervision the SME operation becomes necessary.


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A study (2004) by Micro Industries Development Assistance and Services (MIDAS)

revealed that sources of finance are mostly friends and family member in case of SME.

MIDAS tried to identify the sources of funds of SMEs. These are:

Sources of funds Percentage of finance

Informal sector 41%

Family members 20% (interest free)

4% (with interest)

NGO 17%

Bank 18%

A survey also found that the industrial structure of SMEs consisted of primarily

wholesale and retail trade and repairs (40 per cent), production and sale of agricultural

goods (22 percent), services (15 percent), and manufacturing only (14 per cent). Thus the

survey brought out very prominently the fact that the large untapped potential for

expansion in manufacture and production could be exploited (or contributing more

significantly to the national economy. Another vital finding of the survey under

discussion was that SMEs contributed BDT 741 ($ 12.5) billion or nearly 25 per cent of

the GDP (BDT 2,996 billion) in 2003.

SMEs in leather industry have done well. About 95% of leather and leather products of

Bangladesh are marketed abroad, mostly in the form of crushed leather, finished leather,

leather garments, and footwear. Most leather and leather goods go to Germany, Italy,

France, Netherlands, Spain, Russia, Brazil, Japan, China, Singapore and Taiwan (EU

survey, 2012).

In the last ten years (2002-2012) among the major exporting sectors leather and leather

products account for a significant growth (300%) particularly the leather products sub-

sector (900%). Export of leather products jumped from $ 50 million to $ 435 million

which is only 0.5% of the global market share so there is a huge room to explore the

opportunity for the leather products sector of Bangladesh to increase the world market

share (Source EPB statistics, 2013).

The global leather and its product market size is measured to be as ~US$ 100 billion,

where the share of Bangladesh business is 0.56% (UN Comtrade). The national objective


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of increasing that market share to 2% by 2013 represents an ambitious increase in export

value.

In these mentioned study, authors focus on SMEs, different categories of SMEs, their

potentiality etc. But authors failed to describe SMEs contribution in national economy,

their problems facing to run business. They all emphasized on SMEs product but not

productivity, their raw materials processing.

This paper will describe the present scenario of SMEs, their most important problems,

government‟s policy that is absolutely anti SME friendly. Leather industry, its problems,

prospects, why failure in market accessibly etc. will also be discussed in this research

paper.

1.5 Objective of the Study

The overall objective of the study is to know the present situation of SMEs and its

contribution on economy of Bangladesh and the problems, potentiality and current

situation of SMEs in Leather Industry.

The specific objectives of the study are to:

Examine the role of SMEs in the economy of Bangladesh;

Analyze the current status of SMEs in Bangladesh specially Leather Industry;

Review the situation regarding their access to finance by SMEs;

Identify the major financing constraints to SMEs development in Bangladesh;

Put forward some specific recommendations for future growth of SMEs in

Bangladesh.

Factors constraining SME development in Bangladesh.


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2.1 SME: Definition in Bangladesh

Bangladesh, like many other countries around the world does not have a unique definition

for small and medium enterprises. Different government agencies, like the Bangladesh

Bank, Bangladesh Bureau of Statistics (BBS) and so on, use their own definition. The

absence of a single SME definition makes it difficult to identify target firms, align

development programs, collect data and monitor progress.

Policy Strategies for Small & Medium Enterprises (SME) Development in

Bangladesh, (January 2005) defined SMEs as:

Enterprises shall be categorized using the following definition (fixed investment implies

exclusion of land and building, and valuation on the basis of current replacement cost

only):

♦ Small enterprise: an enterprise should be treated as small if, in today‟s market prices,

the replacement cost of plant, machinery and other parts/components, fixtures, support

utility, and associated technical services by way of capitalized costs (of turn-key

consultancy services, for example), etc, excluding land and building, were to be up to Tk.

15 million;

♦ Medium enterprise: an enterprise would be treated as medium if, in today‟s market

prices, the replacement cost of plant, machinery, and other parts/components, fixtures,

support utility, and associated technical services (such as turn-key consultancy), etc,

excluding land and building, were to be up to Tk. 100 million;

a. For non-manufacturing activities (such as trading or other services), the Taskforce

defines:

♦ Small enterprise: an enterprise should be treated as small if it has less than 25 workers,

in full-time equivalents;

♦ Medium enterprise: an enterprise would be treated as medium if it has between 25 and

100 employees;


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Bangladesh Bank

The Bangladesh Bank classifies small enterprises as manufacturing sector, trading and

service sector.

1. In the manufacturing sector, small enterprises have with no more than 60 workers

with total assets between BDT 0.05 million and BDT 10.0 million.

2. In the trading sector, a small enterprise has no more than 20 workers with total

assets between BDT 0.05 million and BDT 5.0 million.

3. For the services sector, a small industry has no more than 30 workers with total

assets between BDT 0.05 million and BDT 3.0 million.

Bangladesh Bureau of Statistics

The Bangladesh Bureau of Statistics (BBS) classifies enterprises according to total

persons engaged.

1. Micro enterprises are those with total persons engaged of fewer than 10,

2. Small enterprises employ between 10 to 49 people

3. Medium enterprises employ between 50 to 99 people

4. Large firms are those that have more than 100 people working for them.


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2.2 National Industrial Policy 2010

Infrastructural transformation, diversification of the economic base, accelerated economic

growth, employment generation, increase of income and development of livelihood of the

people among others, are the universally recognized dynamic determinants of

industrialization. In order to accelerate the pace of industrialization in the country, the

present Government is committed to announce a realistic Industrial Policy. Accordingly,

the Government has announced the National Industrial Policy 2010. The important and

underlying objectives of the Industrial Policy 2010 include generation of productive

employment, mainstreaming women in the industrialization process and poverty

alleviation. To these ends, consistent with the imperative that labor-intensive industries

are more suited than capital-intensive industries, the policy document spells out measures

for the promotion of cottage, small and medium industries (SMEs). It also spells out

special efforts for ensuring diversified uses of jute to make the jute industry profitable.

In line with the provisions of the SME policy, special measures will be taken to develop

women entrepreneurship ensuring access to land and finance and business support

services. The three important characteristics of industrial sector of Bangladesh will be

proper development of local industries; establishment of import-substitute industries,

where possible and keeping on uninterrupted, increased development of export industries.

A vibrant and dynamic private sector will be the principal actor in Bangladesh's industrial

arena.

In the “Sixth Five Year Plan (SFYP): 2011-2015” and “Outline Perspective Plan of

Bangladesh (2010-2021): Making Vision 2021 A Reality” pledges have been made to

build a modern and vibrant industrial sector.

In order to achieve national growth through industrialization, a range of initiatives will be

taken for the development of private sector. These initiatives will reflect the measures laid

down in all strategy papers of development. Recognizing the need for a planned and

balanced development of SMEs and labor-intensive industries, SME sector has been

given priority.

The strategies set out in the Industrial Policy 2010 are expected to help planned expansion

of industrialization in the country. As a result, a vibrant and potential base of the


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economy will be established which will alleviate poverty, reduce unemployment, create

employment opportunity, develop livelihood as well as accelerate the pace of achieving

economic growth.

2.3 Small and Medium Enterprises (SMEs) Present Scenario

Small and Medium Enterprises (SMEs), by producing exportable surpluses of

commodities together with fulfilling local demands are making significant contribution to

the economy of the country. This sector is a potential sector in terms of local value

additions and creation of employment opportunities. As the large potential of employment

generation by SMEs has attracted attention of the policy makers and observers, a range of

initiatives for channeling loans to SMEs are being taken. Currently banks and financial

institutions are also coming forward to provide finance to this sector alongside traditional

financing from personal and family savings. Bangladesh Bank is operating three funds

such as Bangladesh Bank Fund, IDA Fund and ADB Fund for refinancing the scheduled

banks and financial institutions against the disbursed loans. These funds are being used as

revolving fund. In order to avail of the refinancing facilities, participatory agreement has

already been signed between Bangladesh Bank and 22 banks and 24 financial institutions.

At present, 21 banks and 22 financial institutions are availing of these refinancing

facilities.

The refinancing facilities provided by Bangladesh Bank to the commercial banks and

financial institutions against disbursed loans have been extended up to FY 2010-11. In FY

2010-11 (up to June, 2011) the amount of loans disbursed by all banks and financial

institutions stood at Tk. 5, 52,559.40 million. In FY 2010-11 (up to June), Tk.19306.60

million has been disbursed to banks and financial institutions for refinancing of 21,191

entrepreneurs from the three funds. These refinancing facilities included disbursement of

Tk.12, 361.61 million from Bangladesh Bank Fund (beneficiary coverage included a total

of 13,869, entrepreneurs of which 3,227 were female entrepreneurs), Tk. 3,126.10 million

from the IDA Fund (the number of entrepreneurs was 3160) and Tk.3, 818 million from

the ADB Fund) the number of entrepreneurs was 4162). It may be mentioned that 2,227

female entrepreneurs were provided Tk.2, 333 million as refinancing facility.


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The refinancing facilities provided to 21,191 entrepreneurs are comprised of working

capital (Tk. 4,989.30 million), Mid Term Loan (Tk.9, 749.00 million) and Long Term

Loan (Tk.4, 568.30 million). Detailed refinancing by Bangladesh Bank to various

financial institutions and banks is shown in Table.

Table 2.1: Summary Information on SME Refinancing (up to 30 June 2011)

Bank/Financial

Institutions

Amount Refinanced (In Crore Taka) No. of Beneficiary Enterprises

Working

Capital

Working

Capital

Long

term

Loan

Total

Loan

Industrial

Loan

Commercial

Loan Service Total

A)

Bangladesh

Bank 274.11 673.72 288.33 1236.16 3786 8061 2022 13869

B) IDA 80.34 132.47 99.80 312.61 1368 1306 486 3160

C) ADB 144.48 168.71 68.70 381.89 919 2796 447 4162

Total 498.93 974.90 456.83 1930.66 6073 12163 2955 21191

(A) Summary information on SME Refinancing from Bangladesh Bank(As on 30 June, 2011)

Bank/Financial

Institutions

Amount Refinanced (In crore Taka) No. of Beneficiary Enterprises

Working

Capital

Mid

Term

Loan

Long

term

Loan

Total

Loan

Industrial

Loan

Commercial

Loan Service Total

1

Private Banks.

(21) 248.40 360.20 91.42 700.02 2212 6328 919 9459

2

Financial

Institutions(22) 25.70 313.52 196.91 536.13 1574 1733 1103 4410

Total 274.10 673.72 288.33 1236.15 3786 8061 2022 13860

B) Summary information on SME Refinancing from IDA(As on 30 June, 2011)

Bank/Financial

Institutions


Working

Capital

Mid

Term

Loan

Long

term

Loan

Total

Loan

Industrial

Loan

Commercial

Loan Service Total

1

Private Banks.

(21) 73.07 75.73 28.50 177.30 973 1167 79 2219


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2

Financial

Institutions(22) 7.27 65.74 71.30 135.31 395 139 407 941

Total 80.34 132.47 99.80 312.61 1368 1306 486 3160

C) Summary Information on SME Refinancing from ADB(As on 30 June, 2011)

Bank/Financial

Institutions


Working

Capital

Mid

Term

Loan

Long

term

Loan

Total

Loan

Industrial

Loan

Commercial

Loan Service Total

1

Private Banks.

(21) 144.32 115.72 40.63 300.67 756 2453 226 3435

2

Financial

Institutions(22) 0.16 53 28.07 81.23 167 329 231 727

Total 144.48 168.72 68.70 381.90 923 2782 457 4162

Source: Bangladesh Bank.

2.4 SMEs - Number and Success

No one knows for sure how many SMEs there are in Bangladesh today. It was around

1978 that the BSCIC (Bangladesh Small and Cottage Industries Corporation), under the

Ministry of Industries conducted a survey to find out the number of cottage and small

industries of the country. Inspite of the question about the validity and dependability of

the survey, in absence of any other effort by the Bangladesh Bureau of Statistics (BBS) or

any other agency, this initiative did provide a useful benchmark but it was never updated.

The International Consultancy Group (ICG) of the UK, in collaboration with the Micro

Industries Development Assistance and Services (MIDAS), conducted in 2003 the

National Private Sector Survey of Enterprises in Bangladesh with funding from the

Department of International Development (DFID) of the UK Government, the United

States Agency for International Development (USAID), the Swiss Agency for

Development and Cooperation (SDC) and the Swedish International Development

Cooperation Agency (SIDA).


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The survey results drew the conclusion that there were approximately 6 million micro,

small and medium enterprises (MSMEs), which included enterprises with up to 100

workers employing a total of 31 million people, equivalent to 40 per cent of the

population of the country of age 15 years and above. About three quarters or more of the

household income in both urban and rural areas is provided by the MSMEs.

Table 2.2: Percentage of household income contributed by SMEs.

Strata

Rural (%) Urban (%) Total (%)

Provides all or most all 41 45 42

Provides more than half 19 14 18

Provides about half 16 14 16

Provides less than half 20 17 19

Provides nothing 4 9 6

Total 100 100 100

Source: ICG/MIDAS Survey, 2010

The high level of income contribution was attributed to the fact that the enterprises

worked ten hours per day, 28 days per month for eleven months a year. The survey also

found that the industrial structure of SMEs consisted of primarily wholesale and retail

trade and repairs (40 per cent), production and sale of agricultural goods (22 percent),

services (15 percent), and manufacturing only (14 per cent). Thus the survey brought out

very prominently the fact that the large untapped potential for expansion in manufacture

and production could be exploited (or contributing more significantly to the national

economy. Another vital finding of the survey under discussion was that SMEs contributed

BDT 741 ($ 12.5) billion or nearly 25 per cent of the GDP (BDT 2,996 billion) in 2003.

Those who tend to look down on micro and small industries may be shocked to note that

enterprises employing 2-5 workers are credited for having contributed 51 percent share of

the total SME contribution to the economy, followed by 26 percent by those having only

one worker and 10 per cent by those having 6-10 workers.

Table 2.3: Contribution of SMEs to GDP by size of enterprise

Total contribution to GDP (Taka)

Number of workers Total contribution to GDP Percent of total contribution

(%)

1 193,996,555,724 26


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2-5 379,663,897,358 51

6-10 73,120,983,681 10

11-20 45,183,240,157 6

21-50 33,960,498,076 5

51-100 15,138,922,373 2

Total 741,064,097,360 100

Source: ICG/MIDAS Survey, 2010.

The sectoral contribution of SMEs to the GDP is also interesting. Manufacturing

contributed the highest proportion (38 per cent), followed by Agriculture (24 per cent)

and, closely following, Wholesale and Retail Trade and Repairs (23 per cent)

Table 2.4: Contribution of SMEs to GDP by Sector (Taka)

Source: ICG/MIDAS Survey, 2011

For LDCs like Bangladesh, SMEs are a highly cost-effective route to industrial

development. The present size of the population in the 2-14 years age group is

approximately 16 million. They will be candidates for new jobs. Together with another 10

million inactive people still looking for employment, the total size of the new entrants to

the job market may be said to be around 25 million. What would it cost to provide

employment to these 25 million?

The size of investment varied from industry to industry and enterprise to enterprise. The

highest investment was found to be BDT 3.5 million ($60,000) for food processing and


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the lowest BDT 12,747 ($216) for coir processing. The average investment per enterprise

in the sample was found to be BDT 1.1 million ($18,700). If you put these figures

together (even though this was not a particularly scientific analysis), the investment per

employment works out to BDT 73,694 ($1,250). At this rate, the total investment required

to provide employment to 25 million new jobs would be BDT 1,842 ($31) billion for the

small enterprises sector.

To compare what it might cost to provide employment to 25 million new jobs in the large

industry sector, one needs only look at some of Bangladesh's large fertilizer factories.

Chittagong Urea Factory Limited (CUFL) is said to have cost BDT 14 billion ($237

million) to build, and it employs 982 people (all categories). The Jumuna Fertilizer

Factory (JFF) cost BDT 12.60 billion ($213 million) and employs 1,082 people. Thus

CUFL and JFF respectively required BDT 14.26 and 11.63 million ($241,000 and

198,000) per person employed. Investment costs per person employed in large industries

thus worked out respectively at 100 and 78 times those of SMEs. As for micro-enterprises

promoted by the Grameen Bank and NGOs like BRAC, Proshika, Swanirvar Bangladesh,

ASA, etc., for self-employment of the very poor (80 per cent of whom are women) the

investment required per employment is BDT 5,000 ($85) or less.

Table 2.5: Number of Units and levels of Employment in SMEs

Description Urban Rural Total

Small Medium Large Small Medium Large Small Medium Large

No. of units 39.9 3.17 4.036 29.0 1.29 0.88 68.96 4.46 5.01

% total of

units

50.9 4.0 5.1 38.1 1.6 1.11 87.9 5.7 6.4

Employment 740.4 211.5 1712.

6

516.8 85.85 234.6 1257.

2

297.4 1947.3

% total of

employment

21.14 3.0 48.9 14.8 2.4 6.7 35.9 8.5 55.6

Source: BBS Census of Enterprises, 2001/2003

Thus no elaborate argument is needed to establish the case of promoting micro as well as

small and medium enterprises as the most cost-effective and advisable means of

providing employment and injecting dynamism into industrial growth, both for poverty

alleviation and for contribution to the GDP.


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The industries that have grown in importance in the SME sector in the recent years are

RMG, light engineering, leather, agro products, pharmaceutical, knitwear, plastic

products, electrical goods, electronics, artificial jewelry, wooden and steel furniture,

television and radio assembling and soaps and detergents. This is reflective of a structural

change-taking place in the SME sector from traditional to relatively modern product

categories, perhaps with higher capitalization and use of better production techniques.

Table 2.6: Size and Growth Rate of Manufacturing Sector (At constant prices of

1995-96) (In Crore Taka)

Type of

Industry

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

(Provisio

nal)

Small &

Cottage

Medium-

Large

Total

11496.5

(7.45)

27572.3

(6.95)

39068.8

(7.1)

12408.5

(7.93)

29860.5

(8.30)

42269.0

(8.19)

13551.5

(9.21)

33268.2

(11.41)

46819.7

(10.77)

14865.1

(9.69)

36507.1

(9.74)

51372.2

(9.72)

15920.0

(7.10)

39157.2

(7.26)

55077.2

(7.21)

17018.9

(6.90)

41735.0

(6.58)

58753.9

(6.68)

18340.9

(7.77)

44229.8

(5.98)

62570.7

(6.50)

19686.8

(7.34)

48835.0

(10.41)

68521.8

(9.51)

Source: Bangladesh Bureau of Statistics.

Note: Figures in parentheses indicate rate of growth

Summarizing the findings of various major studies the SMDF lists the following

important positive changes taking place in the situation of the SMEs in Bangladesh:

SMEs have diversified their activities.

Entry and exit into the sector has become easier.

The RMG industry has contributed significantly to SME development

by providing them with orders for accessories and packaging materials

The development of the footwear industry has increased subcontracts

to SMEs.

Small-scale entrepreneurship has grown significantly in agro-processing in general and in

poultry and fisheries in particular.


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3.1 Methodology

This report is based on information collected during four weeks of field research

conducted in Hazaribagh Tannery Area in Bangladesh between mid-March to mid-April,

2013 and literature survey, i.e. secondary sources. In the course of this research, the

researcher visited five tanneries, five leather footwear firm and five leather goods

producing firm.

3.2 Sampling

Based on literature review and considering the potential market accessibility of SMEs,

this study included three types of SMEs in leather industry. These are 1) Tannery 2)

Leather Footwear and 3) Leather Goods.

SMEs were selected based on size/number of employee (higher one and some cases lower

one) and age of enterprise (old one). All samples were drawn from the Hazaribagh area

where it is known as specialized area of leather industry.

3.3 Study Focus

This study mainly focused the following criteria based on standard method in data

collection. These are:

Contribution on Economy (Both SMEs and Leather Industry),

Current Situation,

Funding of SMEs,

Health and safety: Occupational health,


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3.4 Data Collection

Following methods were applied for data collection:

Questionnaire Survey: The study has collected and analyzed information from the

entrepreneurs. The research involves a questionnaire survey. The questionnaire asks

mostly questions keeping in mind the time factor and the variation in educational

background among the respondents. Majority of the questions are pre-coded to facilitate

the analysis of data. In some cases, interviews were conducted using the questionnaire as

a guide.

Group discussion session: One group discussion session with the people nearer to each

of the sampled enterprises was conducted. Representation from different classes (service

holders, business men, day laborers etc.) was ensured. Fifteen group discussion sessions

were conducted near the 15 sampled enterprises. A unified checklist was used.

Observation: Data were also collected through observation during interview, group and

focus group discussions at each of the sampled enterprises.

Literature review: Most of the data has been collected from secondary sources. So the

researcher work is based on published information and data available in any form such as

books, journals, magazines, newspapers etc. devoted to SME sector specially Leather

Industry. Secondary information has been collected from Ministry of Industries,

Bangladesh Bank, SME foundation, Bangladesh Bureau of Statistics, MIDAS and

Financial Institutions and from other SME related organizations. Relevant articles and

literature in this context will also be consulted. In this paper researcher has analyzed the

data of last few years of SMEs of Bangladesh. Researcher has tried to analyze the

performances of SMEs by applying simple statistical analysis i.e., growth percentage,

average etc.

Data were collected in mid-March to mid-April, 2013. Analysis was done based on

qualitative research method.


20

3.5 Limitation of the Study

As I did my research study in SMEs of Leather Industry & I visited fifteen SMEs so my

report is fully based on qualitative data. But to prepare this report I faced little difficulties

through I have also got some limitation which are:

Lack of comprehension of the respondents might be the major problem that might

create many confusions regarding verification of conceptual question.

Time might be a major constraint in accumulating all sorts of information in an

organized way. Due to time limitation many aspects could not be discussed in the

present study.

Confidentiality of data might be another important barrier that might be faced

during the conduct of this study. Every organization has their own secrecy that is

not revealed to others. While collecting data on Leather Industry from different

organization, it is obvious that personnel would not disclose enough information

for the sake of confidentiality of the organization.

Sufficient records & publications as well as up to date information are not readily

available.

Another limitation of this report is the lack of intellectual thought and analytical

ability to make in a perfect one. I have to offset with quality due to time

constraint, which apparently seems to be the most severe limitation.


21

4.1 Leather Industry of Bangladesh

Leather industry is a high potential sector in Bangladesh since its inception in 1970.

Several factors speeded up the growth of the industry including availability of good

quality rawhide, low labor cost, low maintenance cost, governmental assistance etc.

About 95% of leather and leather products of Bangladesh are marketed abroad, mostly in

the form of crushed leather, finished leather, leather garments, and footwear. Most leather

and leather goods go to Germany, Italy, France, Netherlands, Spain, Russia, Brazil, Japan,

China, Singapore and Taiwan.

Currently there are 220 tanneries in Bangladesh. They have a total capacity of processing

about 400 million square feet of wet blue, 300 million square feet crushed leather and 130

million square feet finished leather per year. Bangladesh produces about 223.71 million

square feet leather including 117.54 million square feet crushed leather for export and

106.17 million square feet various type of finished leather per year. The earnings from

leather sector were $290.68 million in 2000-01 of which only $39.97 million came from

finished leather products, said the study. Leather sector can post 148 per cent increase in

earnings if the leather items are exported in finished forms, a study conducted by two

associations said. It said $720 million could be fetched annually from the sector, which

currently earns less than $300 million, mainly from export of crushed leather.

4.2 Present Scenario

This is a 4th largest export earning and highly potential sector in Bangladesh as the 90%

of the basic raw materials - high quality grain leathers are locally available that can

certainly find a strong niche in the world market. This sector is very much akin to RMG

sector, the number one export earning sector in Bangladesh that earned over USD 20b

with imported basic raw materials in 2011-12, and where value addition scope is ~40%.

As oppose Leather sector (where value addition scope is ~90%) in FY 2011-12, grew by

17.5 percent and earned $765 million in revenue, of which $434.8 million was derived

from footwear and leather products, accounting for approximately 57 percent of the total

revenue of the sector. export earnings in 2011-12 stood at USD 330.6m, 10.86% higher


22

than that of previous year. The sector evolved at this stage of its own without much care,

due nurture and patronization.

In the last ten years (2002-2012) among the major exporting sectors leather and leather

products account for a significant growth (300%) particularly the leather products sub-

sector (900%). Export of leather products jumped from $ 50 million to $ 435 million

which is only 0.5% of the global market share so there is a huge room to explore the

opportunity for the leather products sector of Bangladesh to increase the world market

share.

Table 4.1: Export Performances of leather and leather Products (leather footwear

and leather goods) last 5 yrs in USD Millions.

Source EPB statistics, 2013.

The leather products industry includes 3,500 SMEs and 100 lead firms controlling more

than 90% of the export market. Most of the enterprises are located in Dhaka, followed by

two big clusters at Bhairab & Chittagong. The sector generates direct and indirect


23

employment for about 850,000 people, including a significant number of women,

particularly in the footwear and leather goods industries.2

MSMEs are the heart of this sector; the large/organized enterprises are increasingly

depending on SMEs as outsourcing business is on a rise. Apart from that, MSMEs

themselves are exposing as important market players. Despite this fact there is room for

the development of MSMEs in this sector.

With the expansion of export market and increase of per capita income with consequent

higher living standard the demand for local market is also increasing particularly for the

footwear and leather goods which are mostly dominated by MSMEs (70%) 4. Organized

factories like Bata, Apex, Jennys, etc are controlling the rest 30% market5. Domestic

market of footwear and goods in Bangladesh is ~146 millions of pairs worth ~ USD 350

million6. The ratio of sourcing from local enterprises and import is 80:20 in terms of

products quantity. Out of this USD 350 million the imported leather products comprise

40%7 meaning that high ended products are imported. Unfortunately most of these

imported products are smuggled (80%) 8 in. The country is loosing value to the tune of

USD 140 million due to the following reasons –

Absence of clustering strategy for joint production and retailing by MSMEs

Inefficiency in production & lack of skill in quality

Limited access to modern machineries,

Competition from cheap/illegal imports,

Limited access to market information and market linkages

Confidence gap in the consumers about the local products

Lack of access to formal finance.


24

4.3 Contribution on Economy

Leather industry consists of three subsector, 1) Tannery 2) Leather Footwear and 3)

Leather Goods. Each subsector has identified significant contribution in national

economy.

4.3.1 Tannery subsector:

Out of total 220 tanneries in Bangladesh, 187 tanneries are located in Hazaribagh, Dhaka.

The principal raw materials for this sector are cowhides and goatskins. 112-115 big units

have facilities for processing wet blue leather only. The remaining 91-95 small, medium

and large units having reasonable facilities produce crust and finished leather.

The annual domestic supply of hides and skins is around 220 million square feet,

consisting of 63.98% cowhides, 32.74% goat skins, 1.09% sheep skin and 2.219% buffalo

hides. While 50% of this is consumed locally and rest 50% is exported to 53 countries in

the form of semi-finished leather (75%), finished leather (20%), and footwear, handbags,

accessories, and other leather goods (5%)1.


25

The tanneries located in Hazaribag can reportedly process 94% of the hides and skins

available in Bangladesh. However, independent of this capacity, there are issues affecting

the collection of hides and skins even before they reach the tanneries.

Bangladesh lacks fully mechanized slaughter-houses. Approximately 85% of the animals

are slaughtered by unskilled operatives, with the rest of the animals being slaughtered in

semi-mechanized abattoirs. This results in the reduction of value of the leather owing to

loss of shape and incisions in the hides and skins. Furthermore, there is no scientific

preservation and processing system in the country. Improper flaying of hides and skins is

reported to cause about USD 150 million in losses per year. The supply-cycle of skins and

hides 45% of the annual supply becomes available during the festival of Eid-ul-Azha – is

compounded by the lack of storage systems and also working capital.

The global leather and its product market size is measured to be as ~US$ 100 billion,

where the share of Bangladesh business is 0.56%2 . The national objective of increasing

that market share to 2% by 2013 represents an ambitious increase in export value.

This subsector generated direct employment of about 50,000 One of the major concerns

of this sector is its environmental pollution, according to DOE, the tanneries discharge

nearly 22,000 cumec of untreated and highly toxic (contains chromium) into the water

body every day. On the other hand, it produces 100 tons3 of solid waste everyday in the

form of trimmings of finished leathers, shaving dust, hairs, trimmed animal flesh

skins/hides to contaminate the soil and the water.

4.3.1.a Modern Leather Industrial City - Savar

In 2003, the Government of Bangladesh announced that the tanneries located in

Hazaribag will be shifted to a purpose-built and modern cluster in Savar, on the banks of

the river Dhaleswari, 10 kilometers from Hazaribag. The key highlight of the Savar

cluster was to be the Common Effluent Treatment Plant (CETP), conforming to

international environmental standards. The Bangladesh Small and Cottage Industries

Corporation (BSCIC) is the implementing agency for the project.

It will support 195 tanneries with an employment potential of 100,000 people. However,

relocation and moving to designated modern tannery cite with existing outdated old


26

machineries from the existing Hazaribagh cite is a big challenge, and a matter of big

investments for the tannery owners. The sooner it takes place the better.

4.3.2 Leather Footwear subsector

The footwear sub-sector of Bangladesh earned revenues in excess of USD 335.51 million

in 2012-13. The EU is the biggest destination for footwear exports with a 60% share,

followed by Japan with 30%, and the rest of the world accounting for 10%. Bangladesh

has a >1% share of the world footwear market.

Meeting with representatives of the footwear sub-sector highlighted an optimistic

sentiment about business. The businesses view their products as price and quality

competitive. Footwear manufacturers in the country rate themselves as being able to

respond quickly to buyer inquiries, possessing the ability to offer competitive prices,

quality products, and prompt fulfillment of orders. The growth of this sector is very

encouraging and shows off the underlying potentiality of the sector.

Table 4.2: The growth of leather footwear sub- sector

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

2010-

11

2011-

12

Footwear

(all)

68.3

87.78

95.45

123.03

159.16

182.92

204.09

297.8

335.51

Growth

in %

46.56

28.52

8.73

28.89

29.37

14.93

11.57

45.92

12.66

However quite a few supply side weaknesses were also highlighted. Among the most

important are the inability of the tanneries to supply required quantities and quality of

leather and the weak track record of environmental standards, the lack of availability of

high quality components and accessories, the shortage of lasting capacities, the lack of

footwear design and development capacities, the nascent testing and analyses

infrastructure, insufficient numbers of enterprises in the sub-sector, shortage of craftsmen

and supervisory-level personnel, and last but not least, negative buyer perception on

enterprise capabilities.


27

The footwear sub-sector has also been able to attract FDI from East Asian manufacturers

(Taiwanese and Korean). One manufacturer is even planning to establish the world‟s

largest footwear factory with a capacity of 30 million pairs per year in Chittagong. This

kind of investment, when realized, can provide impetus to the development of footwear-

oriented support services such as design and development, component and chemical

manufacturing, as well as testing and analyses capacities. However, there will be an

urgent need to augment human resource capacities and physical infrastructure issues.

Another positive feature emerging in the footwear sub-sector is the development of

possible backward linkages.

4.3.3 Leather goods sub-sector

The leather goods sub-sector in Bangladesh earned export revenues of USD 99.39 million

during 2011-12. This sub-sector displays diversity in enterprise dynamics that is unique,

in that it encompasses very few enterprises that are highly sophisticated in product

development and manufacturing processes, as well as those that are smaller and still

trying to define their competitive competencies.

The sector is very promising, and the growth of this sector is very encouraging:

Table 4.3: The growth of leather goods sub-sector

2008-09 2009-10 2010-11 2011-12

Growth

in %

111.72 54.2 91.29 79.4

The future is perceived very positive, with potential for more than 100% increase

expected in 2012-13. Almost all manufacturers are EU-focused in their exports, and have

been to fairs to show-case their products. They are offered preparatory design and

technical assistances following their participation. This experience was seen as valuable

in light of the fact that they need to develop core competencies at the enterprise-level was

a lesson learnt. Another lesson that came through to the participants was the need for

product differentiation at the enterprise-level.

This sub-sector is keen on developing engagement with its peers in Asia (India, China,

and Vietnam), and believes that technical assistance in craftsmanship may be more


28

suitable if sourced from the region. The representatives of leather goods firms also

expressed the need to organize fair(s) in Bangladesh regularly, and attracting buyers to

visit in conjunction with the Chennai leather fair, in India. Japan.

One of the major constraints raised by this sub-sector was the lack of finished leather

variations to match emerging trends in the EU market, due to the lack of innovation and

upgradation by tanners in Bangladesh. Anecdotal evidence gathered in meetings with

enterprises highlighted that some of the highest quality manufacturers are sourcing

upwards of 40% of their leather requirements from overseas and this impacts

competitiveness. Another constraint seen was the lack of new entrepreneurs entering the

business, to augment capacity and provide a critical mass that can attract more buyers to

Bangladesh. The shortage of craftsmen and supervisory personnel is also another

constraint to the development of this sub-sector.

The leather goods sub-sector is ideal for youth, women and micro entrepreneurs to start

off in, based on the quantum of start-up costs and capital investments. It (the sub-sector)

can also provide the opportunity to gain experience and transform to footwear or other

artisanal sub-sectors. The corporate-gifts are seen as promising markets.


29

5.1 SWOT Analysis

SWOT Analysis of the Bangladeshi Leather Sector based on face to face interview and

secondary data:

Strengths

Governments declared “Thrust

sector”; highest priority is

Footwear & Leather Goods

Renewable natural resources

The growth rate of Bangladesh‟s

livestock population have been

steadily increasing

~90% materials locally available

Unique grain pattern and fiber

structure of cattle, high quality and

reputation of natural leather

Adequate competitive workforces,

availability of labor and low labor

cost

Comparative price advantage in

international market

The sector has favorable conditions

for high value addition ~90% when

the largest RMG sector has value

addition scope ~40%

Unbeatable price offer as basic raw

materials are locally available and

low overhead costs.

Favorable geographical location

Weakness

Selective and limited Access to

Finance

Lack of Skilled Workforces

Lack of access to latest technology

and machinery facilities

Insufficient services and supports

from BIOs.

Absence of entrepreneurial skill rent

seeking mentality.

Poor linkage and coordination

between/among SMEs and lead

firms

Absence of market information and

promotion, inadequate marketing

knowledge of local leather

entrepreneurs

Inefficient/unskilled hide collection

systems

Poor/or no R&D, laboratory

facilities

Vulnerable SMEs; poor enterprise

level cooperation

Poor infrastructure, power

Weak accessories/chemical industry

Dependence on chemical/accessories

import

Skilled designers and facilities for

product design and development are

unavailable

High rate of interest on term loan

and working capital, and many

limiting factors to have access to

finance

Footwear accessories (such as tapes,

trims, buckles, linings, shoe-last,

etc.) are not locally available

Limited product development.


30

Opportunities

Huge untapped international

market, <1% as well as domestic

market

Increasing global demand for value

added, diversified products

Scope of developing backward

linkage business

High value addition potential

High tax on competitors by major

leather products importers

Labor intensive; employment

opportunities

Low wage workers convertible to

skilled ones

No duty on shoes, leather products

made and exported from

Bangladesh.

Establishing by-product industry

with solid and liquid waste through

proper R & D

Local and Foreign Direct

Investment opportunity in value

added leather products sector

China is losing competitiveness

Future Leather estate to raise brand

image

Backward linkage development

Investment in the value added

leather goods and footwear sector

Government policies toward leather

exporters; GSP, Cash Incentive; etc.

Already big players like Young-

one, Blue Ocean, Venturing, Tata

invested in BD signaling many

more to follow.

Increasing International and Local

demands for value added leather

products.

International Fashion and sourcing

houses in BD for RMGs showing

interest in leather products

Threats

Absence of integrated policy; no

long term policy regarding

Common Facility Center (CFC),

SME cluster development,

Branding/promoting Bangladeshi

leather products

No dedicated skill development

institute/ vocational training center

for workers and supervisors

Political instability, corruption

Lack of backward linkage industry

for chemicals/accessories and

substandard quality of the products.

Increasing import of low priced

synthetic products

Illegal export of raw hides/skins

Smuggling and under invoicing of

products

Potential buyers stringent stands for

compliances, and delay in building

Common Effluent Treatment Plant

(CETP) at leather village, Savar,

Dhaka

Emergence of alternative sources

like Myanmar.


31

5.2 Major Findings

a. There are 3 subsectors – i) Leather Tanning, ii) Leather Footwear, iii) Leather Goods.

No other sub sector emerged yet.

b. 90% of basic raw materials i.e. hide locally available. About 220m sq feet of leather of

high grain produced locally.

c. The sector is very much akin to the RMG sector, but there is far greater scope of value

addition ~90% as oppose to RMG where value addition scope is ~40% as basic raw

materials for leather sector are locally available. RMG is the single largest contributor to

export about USD over 20b; however, basic raw materials are imported.

d. 50% of leather is being exported in the form of semi-finished and finished leather

losing the value addition opportunity. Rest 50% is being converted into footwear and

leather products for low-end market.

e. There is an enormous scope for entrepreneurs and investors. The sector is still catering

to the low-end export market. In order to advance it must move to the next levels.

f. Business friendly policy: The sector needs business friendly policy by Government to

increase the investment.

g. Needs more skilled workers and managers: Although there are unskilled competitive

labor forces, there is shortage of skilled workforces, managers and entrepreneurs.

h. Limited access to market - Bangladesh has a limited or small share (~0.56%) in the

global business, so there is a tremendous opportunity to grow to capture more market

share around the world. Vietnam can be a benchmark for Bangladesh who imports 70%

of raw materials and exports Shoes and footwear products: USD 6.549b, Bags & leather

handbags: USD 1.289b.

i. Limited access to market information: A deeper, more widely held understanding of

market trend in terms of quality, fashion, leather product prices, competitors, importers

and consumers‟ preferences, and anticipated regulations and restrictions needs to be

developed in Bangladesh.


32

j. Poor cooperation between firms/ stakeholders: strong connections between value chain

members for a strong sector position, the stakeholders should hold their hands together

for mutual benefits. Unfortunately this is still not the case.

k. Low product quality and productivity: Product quality and overall productivity is

always a concern for this sector. The product quality means the reliability and aesthetics

of the finished products. It stems from the quality of basic raw materials including flayed

hide/skin and chemicals, the overall workmanship and the machines/process used in the

industry, so the sector still today target mostly the low end product market. The main

reasons of poor quality are –

Lack of formal education of stakeholders / owners particularly of tannery

Lack of awareness of stakeholders involved in skin/hide flaying and preservation

business

Limited awareness and knowledge of proper butchery and hide preservation

among amateurs flaying during the (sacrificial) festival

Poor quality of finished leather

Higher prices of imported processing chemicals for hides/skins

Poor quality of raw materials.

l. Outdated Machineries - Traditional status quo mind set of the owners; they lack

information on appropriate machineries, sources, prices etc. They also lack awareness on

incentives for product / productivity improvements, are using traditional tanning and

manufacturing methods and process.

m. Limited access to finance: Lack of awareness of FIs on potentiality and risks of this

business. Collateral and complicated formalities to have finance.

n. Pollution from Tanneries: The tanneries discharge nearly 22,000 cum of untreated and

highly toxic (contains chromium) into the water body every day. It produces 100 tons of

solid waste everyday in the form of trimmings of finished leathers, shaving dust, hairs,

trimmed animal flesh skins/hides to contaminate the soil and the water.

o. Government allocated a dedicated land with CETP and necessary infrastructures in

Savar, adjacent to Dhaka city, to address the major issues against environment, and to

check pollutions by relocating Hazaribagh cluster to Savar.


33

p. Relocation and moving to designated modern tannery cite with existing outdated old

machineries from the existing Hazaribagh cite is a big challenge, and a matter of big

investments for the tannery owners.

q. There is a Institute of leather engineering and technology producing 150 graduates

every year. Many leather engineers get involved in the unrelated fields of their expertise

as the sector is not nurtured or promoted.

r. Although there is a tendency of rent seeking mentality, and avoiding entrepreneurial

challenges, there are many educated leather technologists and business persons who can

emerge as very talented entrepreneurs provided the sector is nurtured and facilitated with

basic requirements of a sector.

s. Lack of support and promotion for SMEs.


34

6.1 Conclusion

Small and medium enterprises (SMEs) act as a vital player for the economic growth,

poverty alleviation and rapid industrialization of the developing countries like

Bangladesh. SMEs are significant in underlying countries economic growth, employment

generation and accelerated industrialization. Government of Bangladesh has highlighted

the importance of SME in the Industrial Policy-2010. SME has identified by the Ministry

of Industries as a „thrust sector‟. As the SME sector is labor intensive, it can create more

employment opportunities. For this reason government of Bangladesh has recognized

SME as a poverty alleviation tool. SME also foster the development of entrepreneurial

skills and innovation. Along with poverty alleviation SME can reduce the urban

migration and increased cash flow in rural areas. As a result it will enhance the standard

of living in rural areas.

Performance of SMEs in Bangladesh is significantly found below the level of

international standard. Although government of Bangladesh has taken some initiative to

ensure the growth of SME but those steps are not enough at all. But government shows its

positive attitude towards this sector. Bangladesh government should continue to give

more focuses on some areas, such as arrangement of finance, provide infrastructure

facilities, frame appropriate legal framework, establish national quality policy etc.

From the sequence of my analysis it seems that Bangladesh has not yet been able to make

a significant breakthrough in its leather sector through diversification and improvement of

the quality of leather products. Bangladesh needs to improve the quality of leather

products for better market access and economic benefits from the international export

market including the developed countries. For this, there need few steps that can rapidly

change the industry internally and externally.


35

6.2 Key Recommendation

In the context of Bangladesh, the development of Small and Medium Enterprises (SMEs)

can be considered as a vital instrument for poverty alleviation and ensure the rapid

industrialization. There should be kept a critical look on SMEs to resolve the common

problems for its development. It will be helpful for this sectors‟ development if few

action is taken given in follows

Government must have to take adequate measures to ensure the uninterrupted

supply of raw materials for SME.

Development of infrastructure is essential for the optimum growth of SME. So

government of Bangladesh needs to take appropriate policy strategy for the

infrastructure development of Bangladesh.

Government, financial institutions and Non Government Organizations (NGOs)

may take necessary steps to ensure uninterrupted financial support to the

prospective SMEs in Bangladesh.

SME foundation may take appropriate marketing tools to popularize their

products.

In this era of intense competition continuous planning and quality improvement

act as a prerequisite for the survival of SMEs. In order to improve the quality

SMEs can follow the Just in Time (JIT) philosophy and use Total Quality

Management (TQM) and can ensure the improvement of quality and productivity

at a time.

Restriction may be imposed on import of SMEs‟ products which are available in

Bangladesh.

As a sector of an emerging economy the promising leather sector has many issues to

resolve, and deserve big supports from all the possible perspective to make the sector

very successful like that of RMG. There are many issues that will hopefully subside as the


36

sector make progress, and as the core issues are thoughtfully addressed. Besides there are

a few recommendations listed below that consultant gathered after interviewing various

stakeholders in the sector:

Establishing two Common Facility Centers (CFCs) equipped with training

facilities including leather products design & patternmaking and manufacture.

Management and Improved technology training are needed to improve managerial

skills and introduce with modern technology for better business development.

Market linkages for the MSMEs to improve the productivity of MSMEs by

exploring possibilities to get access to new markets.

Skill development and strengthening the capacity of leather sector BIOs is needed

to lead and guide the industry increase the share of leather product export

earnings.

Leather Processing: Improper slaughtering and flaying of hides and skins cause a

big loss, and can be reduced by establishing a modern slaughtering house /

abattoir, Standard Operating Procedures (SOPs) and Quality Control (QC),

creating awareness (through extension training & media) on slaughtering &

flaying process, with special focus during the Qurbani festival period.

Market development support: Promote product image through quality-design-

services, establishing market trend intelligence, facilitating participation in

international trade fairs, Organize local fair, Develop website and catalogue.

Access to Finance: Enable Micro, Small and Medium Enterprises (MSMEs) to

qualify for finance through developing innovative financial products.

In accordance with Bangladesh‟s Environmental Conservation Act (1995) and

Environment Conservation Rules (1997), ensure that all tanneries (including


37

relocated ones) have an environmental clearance certificate for industrial units

categorized as “red” (i.e. heavily polluting) from the Department of Environment,

or close them down.

Design a comprehensive environmental strategy for the Savar relocation site to

prevent replicating the environmental damage and hazards to health present in

Hazaribagh. Devise a comprehensive environmental clean-up strategy for

Hazaribagh, prioritizing surface ponds, large dumps of tannery waste, and the

main drainage canals. Remove topsoil polluted beyond the risk-based threshold

values and replace it with clean soil.

Having the basic raw materials for leather goods as well as for the production of leather

footwear, a large pool of cheap but trainable labor force together with tariff concession

facility to major importing countries under GSP coverage, Bangladesh is set to emerge as

the next potential offshore location for leather, leather footwear and allied products

manufacturing with competitive cost but high quality, a manufacturing hub for the global

leather goods industry.


38

References

1. Abdul Awal Minto , SMEs in Bangladesh, CACCI Journal 1, Vol. 1, 2012.

2. Ahmed, K. and Chowdhury, T.A. (2009). “Performance Evaluation of SMEs of

Bangladesh”. InternationalJournal of Business Management, Vol. 4, No. 7.

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Child Labor in Leather Industry: A Study in Dhaka City’, 2012.


39

18. Portable MBA, William ByGrave.

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Bangladesh Export Processing Zones Authority (BEPZA) -www.epzbangladesh.org.bd

Board of Investment (BOI) - www.boibd.org

Bangladesh Bank (Central Bank of Bangladesh) -www.bangladesh-bank.org

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http://www.jetro.go.jp/bangladesh/eng/link_files/survey_report.html

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www.thedailystarnet.com

http://www.banglapedia.com/

http://www.thedailystarnet.com/