Entrepreneurship Development & SME Management

Entrepreneurship Development and SMEManagement
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Chapter 1
Introduction
01.01.What is Entrepreneurship?
Entrepreneurship is the process of creating something new of value by devoting (giving) the
necessary time and effort. By accepting and acknowledging the necessary financial,
psychological, and social risks, and finally receiving the resulting rewards be it monetary and
personal satisfaction and freedom to do what you want.- Robert D. Hisrich, M. Peters & D.A
Shepherd
Simply Entrepreneurship is the Process of creating something new and assuming the risks and
rewards.
01.02.What is an Entrepreneur?
He or she is an individual who actively form or lead their own business and nurture them for
growth and prosperity.
A person who creates and manages change by the recognition of opportunities (needs, wants,
opportunities, problems, and challenges) and develops people and manages resources to take
advantage of the resources to take the opportunity and creates a venture (profitable business).
01.03.Functions of an Entrepreneur
The important functions performed by an entrepreneur are listed below:
1. Innovation:
An entrepreneur is basically an innovator who tries to develop new technology, products,
markets, etc. Innovation may involve doing new things or doing existing things differently. An
entrepreneur uses his creative faculties to do new things and exploit opportunities in the market.
He does not believe in status quo and is always in search of change.
2. Assumption of Risk:
An entrepreneur, by definition, is risk taker and not risk shirker. He is always prepared for
assuming losses that may arise on account of new ideas and projects undertaken by him. This
willingness to take risks allows an entrepreneur to take initiatives in doing new things and
marching ahead in his efforts.

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3. Research:
An entrepreneur is a practical dreamer and does a lot of ground-work before taking a leap in his
ventures. In other words, an entrepreneur finalizes an idea only after considering a variety of
options, analysing their strengths and weaknesses by applying analytical techniques, testing their
applicability, supplementing them with empirical findings, and then choosing the best
alternative. It is then that he applies his ideas in practice. The selection of an idea, thus, involves
the application of research methodology by an entrepreneur.
4. Development of Management Skills:
The work of an entrepreneur involves the use of managerial skills which he develops while
planning, organizing, staffing, directing, controlling and coordinating the activities of business.
His managerial skills get further strengthened when he engages himself in establishing
equilibrium between his organization and its environment.
However, when the size of business grows considerably, an entrepreneur can employ
professional managers for the effective management of business operations.
5. Overcoming Resistance to Change:
New innovations are generally opposed by people because it makes them change their existing
behaviour patterns. An entrepreneur always first tries new ideas at his level.
It is only after the successful implementation of these ideas that an entrepreneur makes these
ideas available to others for their benefit. In this manner, an entrepreneur paves the way for the
acceptance of his ideas by others. This is a reflection of his will power, enthusiasm and energy
which helps him in overcoming the society’s resistance to change.
01.04.The Role of Entrepreneurship in Economic Growth
In order for Entrepreneurs to thrive in a nation, the Government must play important role in
creating the kind of business environment that create the basis for growth, stability and future
success of entrepreneurs.
This primarily involves the:
 Increasing the per capita output and income of the people of the country.
 Initiating and creating change in the structure of business and society. Further growth and
increased output arises, thus to enable more wealth to be divided among the various
participants (stakeholders).
 Generation of innovation that leads to the creation of new product and service.
 Improvisation and modification on existing product to better suit market and customer’s
needs.

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 Creation of self-employment and to cut back the dependency of potential employment of
new workers in government sectors.
 Streamline of the private sector and encourage the inclusion of new technology that is
less labor dependent.
 Increase in the national output which in turn lead to greater and stronger economic
growth.
 Laying the seed bed for creating new entrepreneur in various new technologies such as
Bio Technology, Bio Technology Medicine, Nano Technology , New Material
Technology etc.
 Acting as a catalyst to nurture intrapreneurs and corporate entrepreneurs in a business
organization.
 Providing Government grant and subsidy to existing and would be entrepreneurs to aid
their business development.
 Government decision to engage both would be bumiputra and non-bumiputra in various
entrepreneurship development schemes.
 Providing knowledge and information through seminars, conferences, exhibitions,
various business, small business and entrepreneurial business e-portals.
01.05.The Entrepreneurial Process
The process of pursuing (going after) a new venture or business, Whether it is a new product
going into an existing market OR Existing product going into a new markets OR The
creation of a totally new organization.
First Entrepreneurial Process:
Creation Process – creating something new of value.
Second Entrepreneurial Process:
Requires the commitment of the necessary time and effort. Appreciate and understand the
importance of time and effort devoted to create something new and make it workable.
Third Entrepreneurial Process:
Involves the enjoyment of the rewards (Freedom, monetary) after the effort, followed by
personal satisfaction.
The Entrepreneurial Process – Four distinct process:-
– Identification and evaluation of the opportunity.
–Development of the Business Plan.

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–Determination of the required resources
–Management of the resulting enterprise.
01.06.Characteristics of Entrepreneurship:
Entrepreneurship is characterized by the following features:
1. Economic and dynamic activity:
Entrepreneurship is an economic activity because it involves the creation and operation of an
enterprise with a view to creating value or wealth by ensuring optimum utilisation of scarce
resources. Since this value creation activity is performed continuously in the midst of uncertain
business environment, therefore, entrepreneurship is regarded as a dynamic force.
2. Related to innovation:
Entrepreneurship involves a continuous search for new ideas. Entrepreneurship compels an
individual to continuously evaluate the existing modes of business operations so that more
efficient and effective systems can be evolved and adopted. In other words, entrepreneurship is a
continuous effort for synergy (optimization of performance) in organizations.
3. Profit potential:
“Profit potential is the likely level of return or compensation to the entrepreneur for taking on the
risk of developing an idea into an actual business venture.” Without profit potential, the efforts
of entrepreneurs would remain only an abstract and a theoretical leisure activity.
4. Risk bearing:
The essence of entrepreneurship is the ‘willingness to assume risk’ arising out of the creation and
implementation of new ideas. New ideas are always tentative and their results may not be
instantaneous and positive.
01.07.Types of Entrepreneurs
Depending upon the level of willingness to create innovative ideas, there can be the following
types of entrepreneurs:
1. Innovative entrepreneurs:
These entrepreneurs have the ability to think newer, better and more economical ideas of
business organisation and management. They are the business leaders and contributors to
the economic development of a country.

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2. Imitating entrepreneurs:
These entrepreneurs are people who follow the path shown by innovative entrepreneurs. They
imitate innovative entrepreneurs because the environment in which they operate is such that it
does not permit them to have creative and innovative ideas on their own. Such entrepreneurs are
found in countries and situations marked with weak industrial and institutional base which
creates difficulties in initiating innovative ideas.In our country also, a large number of such
entrepreneurs are found in every field of business activity and they fulfill their need for
achievement by imitating the ideas introduced by innovative entrepreneurs.
Development of small shopping complexes is the work of imitating entrepreneurs. All the small
car manufacturers now are the imitating entrepreneurs.
3. Fabian entrepreneurs:
The dictionary meaning of the term ‘fabian’ is a person seeking victory by delay rather than by a
decisive battle’. Fabian entrepreneurs are those individuals who do not show initiative in
visualising and implementing new ideas and innovations wait for some development which
would motivate them to initiate unless there is an imminent threat to their very existence.
4. Drone entrepreneurs:
The dictionary meaning of the term ‘drone’ is ‘a person who lives on the labor of others’. Drone
entrepreneurs are those individuals who are satisfied with the existing mode and speed of
business activity and show no inclination in gaining market leadership. In other words, drone
entrepreneurs are die-hard conservatives and even ready to suffer the loss of business.
5. Social Entrepreneur:
Social entrepreneurs drive social innovation and transformation in various fields including
education, health, human rights, workers’ rights, environment and enterprise development.
They undertake poverty alleviation objectives with the zeal of an entrepreneur, business practices
and dare to overcome traditional practices and to innovate. Dr Mohammed Yunus of Bangladesh
who started Gramin Bank is a case of social entrepreneur.
01.08.Difference between Entrepreneur and Manager
 The key difference between an entrepreneur and a manager is their standing in the
company. An entrepreneur is a visionary that converts an idea into a business. He is
the owner of the business, so he bears all the financial and other risks. A manager, on
the other hand, is an employee, he works for a salary. So he does not have to bear any
risks.

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 The focus of an entrepreneur lies in starting the business and later expanding the
business. A manager will focus on the daily smooth functioning of the business.
 For an entrepreneur the key motivation is achievements. But for the managers, the
motivation comes from the power that comes with their position.
 The reward for all the efforts of an entrepreneur is the profit he earns from the
enterprise. The manager is an employee, so his remuneration is the salary he draws
from the company.
 The entrepreneur can be informal and casual in his role. However, a manager’s
approach to every problem is very formal.
 The entrepreneur by nature is a risk taker. His has to take calculated risks to drive the
company further. A manager, on the other hand, is risk-averse. His job is to maintain
the status quo of the company. So he cannot afford risks.
01.09. Intrapreneurship
An Intrapreneurship is the system wherein the principles of entrepreneurship are practiced within
the boundaries of the firm. An intrapreneur is a person who takes on the responsibility to
innovate new ideas, products and processes or any new invention within the organization. An
intrapreneur is the individual who thinks out of the box and possesses the leadership skills and
does not fear from risk. Thus, an intrapreneur possesses the same traits as that of an entrepreneur.
01.10.Differences between Entrepreneurship and Intrapreneurship
Point of
difference
Intrapreneurship Entrepreneurship
Definition Intrapreneurship is the entrepreneurship
within an existing organization.
Entrepreneurship is the dynamic process
of creating incremental wealth.
Core
objective
To increase competitive strength and
market sustainability of the
organization
To innovate something new of socio-
economic value.
Primary
motives
Enhance the rewarding capacity of the
organization and autonomy.
Innovation, financial gain tad
independence.
Activity Direct participation, which is more than
a delegation of authority.
Direct and total participation in the
process of innovation. Risk
Risk Hears moderate risk. Bears all types of risk.

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Status Organizational employee expecting
freedom in work.
The free and sovereign person doesn’t
bother with status.
Failure
and
mistakes
Keep risky projects secret unless it is
prepared due to high concern for failure
and mistakes.
Recognizes mistake and failures so as to
take new innovative efforts.
Decisions Collaborative decisions to execute
dreams.
Independent decisions to execute dreams.
01.11.Ethics and social responsibility of Entrepreneurs
Ethics and social responsibility are very important values in entrepreneurship ventures. This is
particularly essential in decision making process. Ethical conscience reminds entrepreneurs to
make trustworthy and profitable entrepreneurship decisions. Likewise, the social responsibility
component sought entrepreneurs to make entrepreneurial decisions that can enhance benefits and
repelling harms to the stakeholders.
The entrepreneur must establish a balance between ethical exigencies, economic expediency, and
social responsibility. A managers attitudes concerning corporate responsibility tend to be
supportive of laws and professional codes of ethics. Entrepreneurs have few reference persons,
role models, and developed internal ethics codes. Entrepreneurs are sensitive to peers pressure
and social norms in the community as well as pressures from their companies.
While ethics refers to the “study of whatever is right and good for humans,” business ethics
concerns itself with the investigation of business practices in light of human values. The word
“ethics” stems from the Greek ethos, meaning custom and usage. Development of Our Ethical
Concepts Socrates, Plato, and Aristotle provide the earliest writings dealing with ethical
conceptions; earlier writings involving moral codes can be found in both Judaism and Hinduism.
Ethics and social responsibilities of an entrepreneur is certainly an important issue considering
the role of social responsibility in society and ethics in business. Social responsibility is
beneficial for business community and at the same time for global community. Social
responsibility is significant owing to the realism of globalization. The people of the universe are
becoming interconnected more owing to the advancement of technology, transportation and
communication. The world market economy is affecting not only services and goods but values
and ideas as well. Expansion on the global front, enhancing regulatory omission and the factors
which is responsible for creating awareness regarding the significance of making for sectored,
macro and operational hazards to both an organization’s and entrepreneur’s competitive position
and reputation. As small business owners and entrepreneurs, activities which harm the people
and the planet, will spoil the scope for your profits. For this reason there is great significance for
“triple bottom line” which is profits, planet and people.

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The world economy requires innovators and entrepreneurs to both advance and sustain global
community. While ethics and social responsibilities of an entrepreneur and businesses undertake
the plan and consider social responsibility a vital event in their activities, everybody benefits.
The effect could be noticed within local communities and ultimate profit making from their
business. With the extension of cooperation for businesses, governments and NGOs, they
encourage in the matter of corporate social responsibility and entrepreneurship and take steps to
improve the mechanism for its potential growth. Therefore, in regards ethics and social
responsibilities, an entrepreneur has to become aware about his role and strive to obey them in
perfect manner which would be beneficial to him as well as the community as a whole
An entrepreneur is actually running his own business and being a businessman he has some
obligation of a business to meet his economic and legal responsibilities. Social responsibility is
basically a business intention, beyond its legal and economic obligation to do the right things and
act in ways that are good for society.
While we are talking about the business ethics, there are three things that need consideration:
(1) Avoid breaking criminal law in one’s work related activity
(2) Avoid action that may result in civil law suits against the company
(3) Avoid actions that are bad for the company image.
For example, an entrepreneur made a chemical that looks like a pesticide and he started selling it
like a pesticide in the market and earns the profit, this act is against the law.

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Chapter 2
Theories and Models for Entrepreneurship Development
02.01. Entrepreneurship Development
Entrepreneurship development is the process of improving the skills and knowledge of
entrepreneurs through various training and classroom programs. The whole point of
entrepreneurship development is to increase the number of entrepreneurs.
By doing this, the pace at which new businesses or ventures are made gets better. On a wider
level, this makes room for employment and improves the economy of a business or country. The
steps below will explain how to create an effective entrepreneurship development program and
how to go about enhancing it.
 Entrepreneurship theories and models
The theories of entrepreneurship are based on psychological/personality traits, sociological
models and socio-economic factors influencing the success of small businesses.
02.02. Psychological Theories of Entrepreneurship
Psychological trait theories of entrepreneurship contend/state that certain attitudinal and
psychological attributes differentiate entrepreneurs from non-entrepreneurs, and successful
entrepreneurs from unsuccessful ones.
These theories include:
• Need for achievement (n-ach) and power by McClelland, 1961.
• Locus of control by Rotter, 1966
• Psychodynamic model by Kets de Vries and
• Risk taking propensity.
01. Need for achievement model.
This theory contends/states that people desire to achieve something for their inner feeling of
accomplishment.
Observations/Criticisms
- This theory has been criticized due to the following;
• The theory is contradictory and it has a limited evidence
• It holds true to some cases while to other cases it is not
• It has no direction of causality
• The theory may be related to the Western culture where personal achievement is very much

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appreciated by the society compared to other cultures.
• It is limited only to business people while other people also show that behavior.
02. Locus of control
This theory contends/states that there is a degree to which one believes that he/she is in control
of one’s destiny. This can either be internal or external.
Internals: The internals believe that what happens to them is a result of their internal efforts
whether it is good or bad.
Externals: These believe that whatever happens to them is a result of external factors whether
good or bad.
Therefore the theory contends that internals are more successful in business than the externals.
Observations/Critics
- This theory correlates to n-ach i.e. people who are internals are the ones who need for
achievement than the externals.
- There is limited research support of this theory.
- Other people are also internals but do not run business e.g. Presidents or Priests.
- Direction of causality i.e. some people tend to work harder when getting success thus become
internals.
- Culture and belief system; i.e. there are societies which their belief system make them more
externals. E.g. those who believe that GOD will do everything for them. This belief also affects
witches and those beliefs in witchcraft.
- Being internal is not always better i.e. you cannot be in-charge of everything such as weather
and other peoples’ behavior. In this case you should be pragmatic and note that there are certain
things which you cannot control ( are beyond your control).
03. Psychodynamic model
This was propounded by Kets de Vries. This says that people tend to be self-employed and
become successful because of “troubled childhood”. In troubled childhood, children tend to be
lacking, security or abused, low self-esteem, lack of confidence. Therefore growing in such an
environment some people do have repressed wishes towards those in control.
This condition/situation occurs when a child has been brought up in either of the
following conditions/situations:
• Loss of one or both parents
• Broken marriages
• Extreme poverty
• Refugees, and
• Child abuse
In this case when these children grow up they exercise what is called “innovative rebelliousness”
by starting and running their own firms. This is also true due to the fact that being rebellious
she/he cannot fit in any organization as she/he will not like structural environment. In this
situation such kids have;

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• averse to structures
• to get away from commands, and
• to be away from control of anybody
Observations/critics
- This theory explains the behavior of extreme category of people leaving out the rest.
- Some people with similar background do not show innovative rebelliousness. Some tend to be
criminals and/or drug addicts or alcoholics.
04. Risk taking propensity
This theory contends about one’s willingness to accept risk.
People who are more likely to accept risk and taking chances are more likely of being self-
employed than those who do not take risk.
Observations/Criticism
- People tend to say that “they take the profit and pass the risk to someone else”.
- People who take risks normally take a “calculated risk” and do not gamble.
- People who are success in business are moderate risk takers.
- It has been suggested that being NOT innovative or NOT producing a new product is more
risky. That is, idleness is more risky than ever.
- Risk is not only a financial loss, but also image loss or loss of relationship with other people in
the society.
02.03. Sociological Theories of Entrepreneurship
These theories suggest that entrepreneurial behavior is a function of the individual’s interaction
with the society. Sociological models that have received significant empirical support are the
inter-generation inheritance of enterprise culture, social marginality and ethnicity.
01. Social marginality model
This theory suggests that individuals who perceive a strong level of incongruence between their
personal attributes and the role they hold in society will be motivated to change or reconstruct
their social reality. While some people may reconstruct their reality by changing careers or
employers, others may choose self-employment.
‘Marginal men” are referred as individuals who are less integrated in their society. Since
marginal men are not completely part of the society of their adoption, they are free of the
restrictions imposed by its value system. At the same time, having left their own society, they are
no longer constrained by its dominant values. This situation gives way to the development of
unconventional patterns of behavior, which increases their propensity to become entrepreneurs.

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- It has been observed that being marginal is not sufficient explanation for the over-
representation of certain people in entrepreneurship carriers e.g. Hispanics and Africans are
underrepresented in entrepreneurship despite them being marginal.
- Aggressiveness and co-operation is among things in which marginal people tend to have.
02. Ethnicity
An ethnic origin of a person is said to influence the choice between paid employment and self-
employment as well as performance in self-employment. Evidence of over-representation of
certain ethnic groups in business carriers abounds throughout the world.
The ethnic groups often quoted in the literature as being overrepresented in entrepreneurship
include Ibos in Nigeria, Kikuyus in Kenya and Chagga in Tanzania. All of these are spread in
different parts of their countries in which they over presented in entrepreneurial careers. To this
extent, they are less integrated in the societies in which they work and therefore less likely to be
constrained by dominant values shared either by their own ethnic group or by their hosts.
- It has been found that, even members of these groups (Ibo, Kikuyu and Chagga) who have
remained in their homelands are quite active in entrepreneurship. Therefore their cultures must
have influenced their entrepreneurial behavior rather than ethnicity.
03. Inter-generational inheritance of enterprise culture via role modeling
This theory purports that entrepreneurial practice is largely inherited. Accordingly, offspring’s of
entrepreneurial parents are more likely to be entrepreneurs and be more successful compared to
others. It has been further suggested that a strong grounding in business and ownership ethic at
an early age is a useful and powerful driving force for children as they choose their future
carriers.
A person, who grows up around a family that runs a business is likely to benefit from the skills,
accumulated experiences and networks of existing firm. She or he is likely to have better access
to advice, credit, established markets and sources of inputs. The fact that these will make it easier
to start a business may be a big encouragement to those associated with businessmen.
Observations
- Several researches supports this theory, however the study done on female entrepreneurs found
that most of them were first generation entrepreneurs and none of their parents have been
running their own business.
- Other studies also found that there is no significant difference between entrepreneurs and
managers in terms of having self-employed parents. However this is the most supported
sociological model.

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02.04. Socio-economic Factors and Small Firms Performance
Socio-economic background factors that have received both research interest and empirical
support are type and level of education and occupational experiences. In comparison to
sociological variables, socio-economic background factors lend themselves more readily to
objective measurements.
01. Level of education
Two conflicting hypotheses have been proposed regarding the role of education in the
entrepreneurial process. The first is that formal education can operate as an
impediment/hindrance to entrepreneurship because, rather than develop creative thinkers, it
fosters conformity and low tolerance for ambiguity, leading to thought and behavior process that
refuse to admit tolerance, and social values that preclude “ getting one’s dirty”.
The alternative arguments is that education is seen as capable of developing competencies
required in an entrepreneurial venture including creativity, curiosity, open mindedness, good
interpersonal skills and technical know-how.
Some studies conducted in USA and Australia found that there is a probability of entry into self-
employment to increase with the level of education.
02. Entrepreneurship education
It is generally agreed that there is a positive association between taking entrepreneurship courses
and becoming self-employed. It has been also found that students who take entrepreneurship
majors tend to be less conforming, more impersonal, more risk taking, more welcoming of
change, have a higher energy level, a profile similar to that of successful entrepreneurs.
Entrepreneurship courses may attract those who have entrepreneurial qualities or, alternatively,
move students towards entrepreneurial archetype by challenging assumptions and encouraging
the development of competencies required.
03. Experience
There are three types of experiences that are considered to be important in determining
entrepreneurial success;
1. Industrial (technical or market) expertise;
2. Management expertise; and
3. Entrepreneurial experience.
An individual’s managerial experience as well as previous entrepreneurial experience is
considered to be incentives for one to become a successful entrepreneur. Previous experience as
an entrepreneur is also likely to give one leads and confidence in venturing into a new firm. It
has also been found that management experience provides contacts, information about business
regulations and procedures, people skills and confidence, all of which are useful in setting up and
running a business successfully.

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02.05. Entrepreneurship Development Cycle:
Entrepreneurship Development Cycle generating entrepreneurial awareness in the community
through well planned publicity. Identifying and selecting potential entrepreneurs. Helping them
through training to raise their motivational level. Improving their skills in modern management
methods. Developing technical competence relevant to the product selected. Helping them to
develop project report. Making available techno-economic information and project profiles.
Helping entrepreneurs to select new products.
01.Stimulatory Phase:
Stimulatory Phase Developing a data bank on new products and process available to target
group. Making available techno-economic information and project profiles Helping them to
develop project report. Developing a data bank on new products and process available to target
group. Creating forums for entrepreneurs to discuss their mutual problems and success. Evolving
new products and processes available to the local situation. Public recognition of entrepreneurial
excellence.
02.Support Phase:
Support Phase This includes all such activities that help entrepreneurs in establishing and
running their enterprises. The activities in this phase may include: Registration of the unit.

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Arranging finance of any type and fixed capital on working capital. Helping in purchase of plant
and machinery. Providing land, shed, power, water, etc. for establishing the unit. Guidance for
selecting and obtaining plant and machinery and layout.
03.Sustaining Phase:
Sustaining Phase Activities in this phase are all those that help the entrepreneur in continuous,
efficient and profitable running of an enterprise. The sustaining activities may include: Helping
in modernization / products substitution. Additional financing for full capacity utilization.
Deferring repayment/interest depending on the situation. Help and guidance in diagnosing the
cause of failure or low production.

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Chapter 3
Environment of Entrepreneurship
03.01. Introduction
 Entrepreneurship environment refers to the various facets within which enterprises- big,
medium, small and other have to operate. The environment therefore, influences the
enterprise. By and large, an environment created by political, social, economic, national,
legal forces, etc. influences entrepreneurship.
03.02. Environment
 Political-Political Atmosphere, Quality of Leadership
 Economic-Economic Policies, Labour, Trade, Tariffs, Incentives, Subsidies
 Social-Consumer, Labour, Attitudes, Opinions, Motives
 Technological-Competition And Risk, Efficiency, Productivity, Profitability
 Legal-Rules, Regulations
 Cultural-Structure, Aspirations And Values
03.03. The Types of Entrepreneurship
The types of entrepreneurs vary depending on background, country and even sector but the 5
most common types are:
 Innovators
 Hustlers
 Imitators
 Researchers
 Buyers
03.04. Important of entrepreneurship
01.Entrepreneurs Create New Businesses
Path-breaking offerings by entrepreneurs, in the form of new goods and services, result in new
employment, which can produce a cascading effect or virtuous circle in the economy. The
stimulation of related businesses or sectors that support the new venture add to further economic
development.

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02.Entrepreneurs Add to NationalIncome
Entrepreneurial ventures literally generate new wealth. Existing businesses may remain confined
to the scope of existing markets and may hit the glass ceiling in terms of income. New and
improved offerings, products or technologies from entrepreneurs enable new markets to be
developed and new wealth created.
03.Entrepreneurs Also Create SocialChange
Through their unique offerings of new goods and services, entrepreneurs break away from
tradition and indirectly support freedom by reducing dependence on obsolete systems and
technologies. Overall, this results in an improved quality of life, greater morale and economic
freedom.
04.Community Development
Entrepreneurs regularly nurture entrepreneurial ventures by other like-minded individuals. They
also invest in community projects and provide financial support to local charities. This enables
further development beyond their-own ventures.
05. The Role of States
Regulations play a crucial role in nurturing entrepreneurship, but regulation requires a fine
balancing act on the part of the regulating authority. Unregulated entrepreneurship may lead to
unwanted social outcomes including unfair market practices, pervasive corruption, financial
crisis and even criminal activity.
06. Environmental Analysis
This integrated approach, which is the key to the development of backward areas, implies
a very careful environment analysis or research study of the target groups of
beneficiaries; their activities can be linked with the covering enterprise. Unless these
studies are made meticulously, the entire planning will only give unproductive results.
Most of the development schemes fail to benefit the target clientele because elaborate
linkages are not identified and built up. An imaginative study should
 Identify the beneficiaries or target group
 Analyse the environment for immediate feasible enterprises in an integrated manner;
 Delineate the linkage and institutional arrangement;
 Recommend appropriate organizational structures to provide necessary promotional
support.

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Chapter 4
Women and other social Entrepreneurship
04.01.What is Social Entrepreneurship?
Social entrepreneurship is all about recognizing the social problems and achieving a social
change by employing entrepreneurial principles, processes and operations.
It is all about making a research to completely define a particular social problem and then
organizing, creating and managing a social venture to attain the desired change. The change may
or may not include a thorough elimination of a social problem. It may be a lifetime process
focusing on the improvement of the existing circumstances.
04.02. Who is a Social Entrepreneur?
A social entrepreneur is somebody who takes up a pressing social problem and meets it with an
innovative or path breaking solution.
Since profit making is a secondary objective, therefore they are people who are passionate and
determined about what they do. They possess a very high level of motivation and are visionaries
who aim at bringing about a change in the way things are.
04.03.What is Social Business?
Social business is a business that is aimed at addressing a social cause.
The investment made by the investors is entirely with a vision of contributing to the social
welfare and not profit entirely. The investor may however get back his money after a certain time
and cover all the operational costs of the organization.
04.04. Principles of Social Business
The idea of social business was given by Prof. Muhammad Yunus of Bangladesh. It was
unique because unlike other concepts or businesses that were serving the society for namesake,
social business was based on certain principles. These principles are seven in number and are
called the principles of social business.
Like any other principle, the seven principles of social business define the purpose of a social
business and its modus operandi. They outline the priority sectors for any organization or
individual that aims to venture into the field and also define the how the financials would be
managed.
01. The first principle of social business defines the purpose of existence for any social
business. It states that the business objective for a social business will be to overcome
poverty or deal with some problem like education, nutrition, healthcare, environment and

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enabling technology access for the downtrodden and not just profit or shareholders
wealth maximization.
02. The second principle talks about the financial and economic sustainability. This is both
from the perspective of the organization and those who it aims to serve. Any social
business is disallowed to take funds from outside like grants or NGO. Those who run the
business are supposed to invest.
03. The third principle governs the return on investment. Investors in a social business are
disallowed to take money beyond their investment. No dividend is given on the
investment.
04. Amount earned over and above the investment is supposed to be reinvested back in for
scaling the business and for improvement. Expansion here is aimed at reaching out to
more number of people or to improvise the quality of services.
05. Social businesses are supposed to be responsible to the wellbeing of the environment.
They are to play a major role in betterment of the environment either directly or
indirectly. Indirectly means through their operations they will ensure that they do no
harm to the environment.
06. Those working with the business as its employees will get a fair compensation, which is
in accordance with the industry benchmark. In addition the workforce will get better
working conditions.
07. Since social business is not with the objective of profit maximization. Therefore only
those who have a passion for contributing to the society and the environment will run a
social business. This means that business will run in an environment of joy and not stress.
04.05. Who is Women entrepreneur?
A women entrepreneur is someone who develops a business model, acquires the necessary
physical and human capital to start a new venture, and operationalizes it and is responsible for its
success or failure.
04.06. Succession factors of Women Entrepreneurs:
Women entrepreneurship is essential for the development of any economy. Countries which
have flourished attribute their rise to the growth of entrepreneurship.
a) Legal Factors
Entrepreneurs are dependent upon law for a wide variety of factors. The strength and fairness of
the legal system of a nation affect the quality of entrepreneurship to a large extent. This is
because entrepreneurs require a wide variety of legal services to function. For instance,

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entrepreneurs would require the courts to enforce the contracts that were entered to between
parties. In many countries such contracts are not enforceable and therefore the resultant risk
prohibits the development of entrepreneurship. Then again, the entrepreneurs are dependent on
the courts for the protection of their property rights. Also, many advanced countries have noticed
that the provision of declaring bankruptcy has been positively associated with the development
of entrepreneurship. Entrepreneurs do fail a few times before they find the right innovation that
leads to their success. The United States is amongst the countries with the highest rate of
entrepreneurial development and it is also known to have one of the most advanced bankruptcy
laws! Even business legends like Henry Ford had declared bankruptcy in their early days.
b) Taxation
The government can also influence a high degree of control on the market through provisions of
taxation. Some amount of taxation is necessary for the government to maintain the legal and
administrative systems in place for the entire economy. However, a lot of times governments
resort to excessive taxation. They usually adopt the policy of beggaring the rich and giving it off
to the poor. This goes against the basic tenets of entrepreneurship which believes in survival of
the fittest. Therefore, countries where tax regimes are restrictive find an outflow of
entrepreneurs. In short, entrepreneurs want to set up shop in places where there is minimal
interference from the government.
c) Availability of Capital
The degree to which the capital markets of a nation are developed also play a huge role in the
development of entrepreneurship in a given region. Entrepreneurs require capital to start risky
ventures and also require instant capital to scale up the business quickly if the idea is found to be
successful. Therefore, countries which have a well-developed system of providing capital at
every stage i.e. seed capital, venture capital, private equity and well developed stock and bond
markets experience a higher degree of economic growth led by entrepreneurship.
d) Labor Markets
Labor is an important factor of production for almost any kind of product or service. The
fortunes of the entrepreneurs are therefore dependent on the availability of skilled labor at
reasonable prices. However, in many countries labor has become unionized. They demand higher
wages from the entrepreneurs and prohibit other workers from working at a lower price. This
creates an upward surge in the costs required to produce and as such has a negative effect on
entrepreneurship.
With the advent of globalization, entrepreneurs have witnessed the freedom to move their
operations to countries where labor markets are more favorable to them. This is the reason why
countries like China, India and Bangladesh have witnessed a huge rise in entrepreneurial activity
in their countries.
e) Raw Materials
Just like labor, raw material consisting of natural resources is also an essential product required
for any industry. In some countries this raw material is available through the market by paying a
fair price. However, in some countries seller cartels gain complete control over these natural
resources. They sell the raw materials at inflated prices and therefore usurp most of the profit

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that the entrepreneur can obtain. Therefore, countries where the supply of raw material faces
such issues witness depletion in the number of entrepreneurial ventures over time.
04.07. Problems Faced By Women Entrepreneurs
01. Lack Of Knowledge
Lack of knowledge among the women entrepreneurs is a common barrier. Many of them have no
education over class eight or SSC level. Knowledge about business enterprise, business
management, environment, entrepreneurship, economics and policy are
education at all, of which nearly 17 percent could neither read nor write and the other 59.3
percent were only able to put on their signature. 72 percent of the respondents strongly agree, 20
percent agree that lack of knowledge is a major problem while 4 percent remained indifferent.
02. Family Responsibilities
Family responsibilities such as household work, caring for elders and rearing children
prevent them from gaining skills, knowledge properly since they cannot usually find the
suitable time to be more proficient. Male entrepreneurs do not have to be anxious because much
about their household duties are done by the female entrepreneurs. Such added mental and
physical stresses
mobilize their wealth and resources to expand their expertise. Deficiencies in managerial skill,
strategic planning, organization perception etc. are result of such distraction which is the
key responsibilities for entrepreneurship development to ensure sustainability. 70 percent of
the respondents strongly agreed, 30 agreed that responsibility towards family in another reason.
None of them were indifferent, disagreed and strongly disagreed.
03. Lack Of Skilled/Trained Manpower
Lack of skilled and trained manpower is a further barrier to women entrepreneurship growth.
Profitable business requires skilled and trained manpower that have greater output, less wastages,
superior quality of products so cost of production is reduced. Adds hardly there are few
agencies, in Bangladesh to produce qualified graduates or trained manpower that can serve as
entrepreneurs. Mainly to create entrepreneurs no hard and fast facility is necessary; but for a
successful entrepreneurship generation, entrepreneurship education is necessary. Bangladeshi
labors are low productive, do not have sufficient training, skills for greater quality output.
Among the respondents 78 percent strongly agreed that lack of skilled and trained workers are
not available which a major barrier for women entrepreneurship development is. 28 percent of
the respondents also agreed at this point. 2 percent of them were indifferent, 2 percent disagreed
while none of the strongly disagreed.
04. Access To Marketing Facility
Access to marketing facility is another barrier to women entrepreneurship development. Among
the respondents 88 percent of the respondents strongly agreed, 10 percent agreed that Access
to marketing facility is major barrier. 2 percent of them were indifferent while none of the
disagreed or strongly disagreed. Products and services produced by women entrepreneurs under

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micro, small and medium enterprise (SMEs) needs to be marketed. Access to marketing facility
and markets is affected by some essential aspects, such as expert experience, conception
and acquaintance. Sinha (2005) discusses that due to inability of exchange to the market
commodities women entrepreneurs frequently face troublesome difficulties in running their small
and medium enterprises (SMEs). Further Rahman (2010, p.12) argues that even though many of
them have good skills in marketing and mediator capability occasionally they are not able to
make any contract with local and international markets because of some social restrictions
and violence. When launching business enterprises, unfamiliarity with the outside world
hampers rural women entrepreneurs in entering into contracts with a range of agencies.
05. Access To Marketing Information And Network
Activities of women entrepreneurship are not easily included in trade, industry or business
involvement. Access to marketing information is a problem of women entrepreneurs. They do
not know how to get access to domestic as well as export market. Even they do not have
knowledge of using market promotion activities. 74 percent of the respondents strongly agreed,
22 agreed that unavailability of information relating to market is a major problem. 2 percent
remained indifferent while 2 percent disagreed and none strongly disagreed in this regard. There
are rarely any women-majority or women-only networks where a woman can achieve self-
reliance, participate and attempt to make improvement. The majority of these existing networks
are controlled by men and sometimes not mostly welcoming to women, whereas men expect
lots of things together in one time of observing
in setting up smaller extent of enterprises having difficulty to acknowledge information. It has
been estimated that around 50% of SMEs are operated by women, less than twenty women were
registered among nearly 250 participants, and mainly were civil servants rather than female
business personnel. (Sinha, 2005, p.19). The study also includes that many developing countries
recurrently arrange spouse programs to establish the involvement of husbands to bring together
their non-working wives. Further, the evidence entails that even though taking some plans on
this, the FBCCI (Bangladesh Federation of Chamber of Commerce and Industries) has
ineffective in promotion of feminine entrepreneurship.
06. Lack Of Access To Policymakers
The major part of women entrepreneurs in Bangladesh has very restricted access to
policymakers. Lack of access to information
more easily influence policy and have access to policymakers in large companies Women have
less chance to enter a leadership position or conventional business enterprise. Further, very often
lobbying are the cause behind their decreasing ability to apply their own potential to policy
making.
07. Lack Of Access To Infrastructure
Insufficient infrastructure or lack of infrastructure acts as a hurdle. The supply of electricity,
power and gas are not available in many rural and even sub-urban areas. Consequently, existing
women enterprise both micro, small and medium enterprise (SMEs) are suffering badly due to
load shedding of electricity and insufficient supply of gas. So, government should develop the
infrastructure and utility services in considering the need of Micro and SME sector. Among the
respondents 88 percent strongly agreed that lack of infrastructure is also barrier to women
entrepreneurship development. 11 percent also agreed in this ground while none were indifferent

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and 1 percent disagreed. Infrastructure is essential for development of women entrepreneurship.
In this connection (Rahman, 2010).adds poor infrastructure have an effect on village women„s
capacity to develop their enterprises. (Sinha, 2005,) also adds various substandard plans by
government or other regulatory authority are the main cause for the lack of proper provision of
visible and dependable infrastructure for feminine entrepreneurship. (UNDP, 2007A,
p.07)Further unplanned road, air or other physical transportation and communication
systems, unorganized supportive government policy, trade and commerce regulation etc. are
the main constraints for infrastructure development which would assist rural female
entrepreneurs in Bangladesh.
08. Lack Of Access To Technology
Women entrepreneurs in SMEs usually use local technologies to manufacture goods and provide
services. But to compete with the international products available in the local market these are
not productive enough to fulfill market demand, produce quality products. As a consequence,
Women SME entrepreneurs are losing their income due to poor technical know-how. In a study
(UNDP 2007A) it is apparently true that women get less access to technological innovation
than men due to lack of self-confidence and also lack of utilization of modern technologies.
Further (Rahman, 2010, p.22) adds that they have to deal with low quality products and
production, inadequate marketing channels to distribute their products, lower investment or
capital and low income over and over again. Unavailability of modern technological facilities
internet, e-commerce, e-trade, e-banking, mobile,
strongly agreed that insufficient outdated technologies, lack of availability of modern technology
is a major barrier to women entrepreneurship and their evolution. 26 percent of the respondents
also agreed in this connection while 4 remained indifferent, 2 percent disagreed and none were
strongly disagreed.

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Chapter 5
Entrepreneurship Development in Bangladesh
05.01. Entrepreneurship Development in Bangladesh
Entrepreneurship plays an essential role in ensuring a strong resource for economic development
and it is the key to high growth of economy in a country. It is also considered as the root of our
economy. With a growing economy like Bangladesh, having an increasing youth population,
entrepreneurs will be a key driving force to meet the needs of the industry and economy. It has
the ability to foster growth and alleviate poverty. One of the major problems of entrepreneurship
development in our country is the absence of the entrepreneurship skills in majority of the
entrepreneurs. In line with this, BRAC University, first time in Bangladesh, came-up with an
idea to establish a Centre for entrepreneurship development with a commitment to contribute to
the development of entrepreneurship in Bangladesh.
05.02. The problem of entrepreneurship development in
Bangladesh:
In Bangladesh there is no abundance facilities for developing entrepreneurship rather exist a
large number of obstacles, which are liable for not developing entrepreneurs in Bangladesh
described in below:
1. Improper publicity of Govt. facilities: Sometimes Govt. provides facilities for
developing entrepreneurs in limited basis. Those have not informed properly to the
remote villagers. Therefore, these facilities cannot work well. Some urban centered
people accept the facilities that are not all for developing entrepreneurs all over the
country. So this is one of the fundamental obstacles.
2. Insufficient arrangement for pre-investment advice: Pre-investment advice
is essential to ensure best use of investment. In our country there is no sufficient
arrangement of pre-investment advice for this reason most of entrepreneur can’t study
market feasibility for the product and business. Demand for the product in market,
possibility of gaining profit etc. with the lack of this study most of the entrepreneur can’t
operate their activities successfully. Many of them fail in their initial activities.
3. Lack of required financing: This is the fundamental problem of developing
entrepreneurship in Bangladesh. Here, entrepreneurs faces problem in collecting required
working capital and fixed capital most of the financing organization demand for
supporting papers and apply rigid condition as a result most of the entrepreneurs can’t get
required capital to operate their activities smoothly. Working capital, fixed capital and
capital for expansion of business of business.

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4. Scarcity of raw materials and other factors of production: In our country
there is an immense shortage of basic raw materials to operate industrial activities
smoothly such as skilled manpower technology capital and so on, for why they have to
import basis raw materials and supplementary factors of production that increase the cost
of production. As a result entrepreneur can’t take initiative to establish industrial
organization smoothly.
5. Problem in marketing produced product: Now a day marketing of the product
has become an important task in business that largely exists in our country. In open
market economy, product of the home and foreign countries are compete each other in
same market. Usually quality products capture the market. Because of different problem
and lack of factors of production our entrepreneur can’t produce or hardly produce
quality product as developed country. For reason, now a day, they face marketing
problem greatly for every product.
6. Lack of training: Training is essential to work efficiently and effectively in any field.
Training is a practical experience regarding job that is necessary to increase efficiency
and productivity. In our country, there is no available training center to provide training
in developing entrepreneurs. As a result, people cannot come ahead to take initiative that
is an obstacle to develop entrepreneurship.
For going are the obstacles or problem in developing entrepreneurs and entrepreneurship in
Bangladesh.
05.03. The opportunities or prospects of entrepreneurship
development in Bangladesh:
As a third world country a considerable number of entrepreneurs has not been developed.
Nevertheless, there is a great possibility of developing entrepreneurship in Bangladesh.
Following are the prospects and opportunity of entrepreneurship development in Bangladesh.
1. Availability of human resources: Bangladesh has its vast population of about 15
million. So there is a great possibility of developing entrepreneurship and entrepreneurs
in Bangladesh. HR is the fundamental factors of production that is available in vast
amount. So production that is available in vast amount. Therefore, entrepreneurs can
easily use them with on payment that may encourage them to be entrepreneur. Therefore,
abundance of HR is the great opportunity in creating entrepreneurs in Bangladesh
2. Industrial innovative sensation: People of Bangladesh have industrial innovative
sensation.They may get involved largely in industrial initiative if they get favorable

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opportunity. Already they established many small and cottage industries with the help of
NGO's and other financing institution.
3. Mobility of profession: A considerable number of villagers now replaced their
agriculture-based profession into petty businesses and many other small and cottage
industry. Many of them transferred into city area. Thus, way here creates a mobility of
profession. That is another prospect of developing entrepreneurship in Bangladesh.
4. No religious hindrances on mobility of profession: In Bangladesh, there are
any religious and cultural hindrances on mobility of profession. Most of the people are
changing their work, profession day by day. In past, certain religious people belong to
certain profession. But now people get engaged in their desired profession without
religious and cultural hindrance. That is another prospect of creating entrepreneurs.
5. Large number of educated unemployed: In our country, there are many
educated unemployed people, but there is a limited scope of employment. For this reason,
educated unemployed people will take new initiative to do something new themselves.
As there is a close connection of education and entrepreneurship there is a possibility of
developing entrepreneurship.
6. Tendency toward industries work: Industrials work bears more salary, status,
facilities for living in city area and so on. For this reason people tending towards
industrial work. Thus, industrial sector will be developed in future. Such mentality and
tendency is helpful in developing entrepreneurs. Therefore, it is another prospect of
developing entrepreneurs.
From above mentioned discussion, we observed that there is a greater possibility of developing
entrepreneurs in Bangladesh.
05.04. Entrepreneurship Development Process:
Major assistance requirements of the new entrepreneurs are worth mentioning while discussing
the entrepreneurial development as a tool of economic growth of a nation. They need multiple
assistance which may be offered in a package form. To set up an enterprise and run it
successfully an entrepreneur need these types of assistance. These three groups of assistance
form 26an Entrepreneurship Development Cycle. The groups of assistance are:

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 Stimulatory: The stimulatory activities comprise entrepreneurial education, provision of
entrepreneurial opportunities and guidance in selecting industries are needed to help
emergence of entrepreneurship in the Society. This support ensures a good supply of
entrepreneurs to start a new venture and develop potentiality to succeed in a venture.
1. Help modernization
2. Help diversification/expansion / substitute production.
3. Additional financing for full capacity utilization
4. Deferring repayment/interest.
5. Diagnostic industrial extension/consultancy source.
Support: The support activities refer to those which enable the entrepreneurs in setting up and
running the enterprises successfully. They help in mobilizing resources and assistance.
1. Entrepreneurial education.
2. Planned publicity for entrepreneurial opportunities.
3. Identification of potential entrepreneurs through scientific methods.
4. Motivational training to new entrepreneurs.
5. Help and guide in selecting products and preparing project reports.
Sustaining: The sustaining activities include efforts which help the entrepreneurs sustain
themselves against the challenges of actual operation. Many enterprises starting well, meet
immature death subsequently because of some problems. Such cases are many and they are
particularly more significant in the field of small enterprises.
1. Registration of unit
2. Arranging finance
3. Providing land, shed, power, water etc.
4. Guidance for selecting and obtaining machinery
5. Supply of scarce raw materials.

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05.05. Entrepreneurship development program available in
Bangladesh:
In Bangladesh, both Govt. and NGO’s provide special support to entrepreneurs. Among them
some Govt. organizations are-
a. BSCIC,
b. Karmasangsthan Bank,
c. Krishi Bank,
d. Basic Bank Ltd.
Some NGO’s are-
a. Grameen Bank Ltd.,
b. BRAC,
c. MIDAS Financing Ltd.,
d. BRAC Bank Ltd
A case study on entrepreneurship development program provided by them in Bangladesh is
given below-
01.BSCIC:
Bangladesh Small and Cottage Industries Corporation (BSCIC) is the prime mover organization
entrusted with the responsibility of development of small and cottage industries (SCI) in
Bangladesh. It is an autonomous corporation under the Ministry of Industries and was
established by an Act of the parliament in 1957. It is the successor organization of EPSCIC.
Main Objectives of BSCIC:
• Increase of industrial production and productivity in the SCI sector;
• Creation of employment opportunities;
• Poverty alleviation;
• Balanced regional growth;
• Ensure optimum utilization of economic and human resources;
Accelerate overall economic growth of the country through SCI.

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BSCIC Provides-
1. Pre-investment counseling
2. Post-investment extension services
3. Technical information
4. Design and prototype of handicrafts
5. Industrial profiles and fact sheets
6 .Marketing information
7. Infrastructural facilities
8. Skill development training
9. Entrepreneurship development training
10. In-plant advisory services
11. Credit facilities etc.
Credit Program: For the promotion and extension of small & cottage industries BSCIC
arranges credit facilities with the help of banks and other financial institutions .On the other hand
BSCIC has some credit programs .These are:
1. Development of rural industries
2. Poverty Alleviation through Income Generation Program
3. Self-employment through small & cottage industries
4. Women Entrepreneurship Development Program
5. Revitalization Of Rural Economy Through Development of rural industries
02.KarmasangsthanBank:
The Karmasangsthan Bank was established in 1998 as per Karmasangsthan Bank Act No.7 of
1998 with a view to involving the unemployed people of the country especially the unemployed
youths in the economic activities through self-employment opportunities for poverty alleviation.
The Government enforced this law on 30 June 1998 being empowered to do so by article 1(2) of
this Act. The Bank formally started functioning since 22 September 1998 through disbursement
of loans from its main branch at Dhaka.

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Activities of the Bank:
Karmasangsthan Bank provides credit facilities in cash or in any other manner for all sorts of
economic activities, especially to the unemployed youths, for self-employment, with or without
security. Karmasangsthan Bank can perform the following activities subject to terms and
conditions prescribed by Bangladesh Bank :
1. To receive deposits from statutory bodies, companies, loans of the Bank and from such other
persons as not determined as a single person for the purpose by the Govt.
2. To procure/receive credit by way of mortgage of its assets or anything else for conducting its
business.
3. To secure pledge, mortgage, hypothecation or assignment of movable or immovable property
as security against loans and advances granted by the Bank.
4. To purchase shares of any statutory body.
5. To receive savings certificates, title deeds of ownership or any other valuable articles for
keeping them in safe custody.
6. To form, operate and control any kind of fund or trust and to hold and deliver shares of such
fund or trust.
7. To accord advice to the loans of the Bank about investment of the loan.
8. To invest Bank’s fund in any sector approved by the Govt.
03.BangladeshKrishi Bank:
Bangladesh Krishi Bank (BKB) is a 100% government owned specialized Bank in Bangladesh.
KRISHI means Agriculture. Since its inception, BKB is financing in agricultural sector
remarkably. BKB also performs commercial banking.
The major occupation of the people of Bangladesh is “Krishi”. Krishi is a Bengali word which
means “Agriculture”. About 85% of the population depends directly or indirectly on agriculture
which contributes a significant portion to GDP.
Bangladesh Krishi Bank (BKB) has been established under the Bangladesh Krishi Bank order
1973 (President’s Order No 27 of 1973). BKB is a Banking Company under the Banking
Company Act-1991.
Credit Programs:
1. Crop Loan: Out of total annual allocation of Loan portfolio, 60% is earmarked for Crop
financing. The Credit program covers all the seasonal crops produced in the country. The
loan is disbursed as per norms set by the Bangladesh Bank. The rate of interest for this

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sector is 8%. The rate of interest may however, vary from time to time. Both the
landowner and sharecroppers are normally the target group for this loan. Marginal
farmers are also eligible for the loan. Crop loan is sanctioned on annual basis. Credit
passbook is issued to each borrower.
2. Fisheries Loan: To accelerate fish production BKB provides loan for excavation and re-
excavation of ponds, development of marshy lands, establishment of fish hatcheries and
new fisheries projects. The Loans are given in the following sub sectors:
a. White Fish
b. Shrimp culture (Marine, Brackish water and sweet water Culture)
c. Fish & Shrimp hatchery (fingerlings production
04.BASIC Bank Ltd.:
BASIC Bank Limited (Bangladesh Small Industries and Commerce Bank Limited) registered
under the Companies Act 1913 on the 2nd of August, 1988, started its operations from the 21st
of January, 1989. It is governed by the Banking Companies Act 1991. The Bank was established
as the policy makers of the country felt the urgency for a bank in the private sector for financing
small scale Industries (SSIs). At the outset, the Bank started as a joint venture enterprise of the
BCC Foundation with 70 percent shares and the Government of Bangladesh (GOB) with the
remaining 30 percent shares. The BCC Foundation being nonfunctional following the closure of
the BCCI, the Government of Bangladesh took over 100 percent ownership of the bank on 4th
June 1992. Thus the Bank is state-owned. However, the Bank is not nationalized; it operates like
a private bank as before.
BASIC Bank Limited is unique in its objectives. It is a blend of development and commercial
banks. The Memorandum and Articles of Association of the Bank stipulate that 50 percent of
loanable funds shall be invested in small and cottage industries sector.
The Bank Offers:
1. Term loans to industries especially to small-scale enterprises.
2. Full-fledged commercial banking service including collection of deposit, short term trade
finance, working capital finance in processing and manufacturing units and financing and
facilitating international trade.
3. Technical support to Small Scale Industries (SSls) in order to enable them to run their
enterprises successfully.

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4. Micro credit to the urban poor through linkage with Non- Government Organizations
(NGOs) with a view to facilitating their access to the formal financial market for the
mobilization of resources.
5. In order to perform the above tasks, BASIC Bank works closely with its clients, the
regulatory authorities, the shareholders (GOB), banks and other financial institution.
05.GrameenBank:
Grameen Bank (GB) has reversed conventional banking practice by removing the need for
collateral and created a banking system based on mutual trust, accountability, participation and
creativity. GB provides credit to the poorest of the poor in rural Bangladesh, without any
collateral. At GB, credit is a cost effective weapon to fight poverty and it serves as a catalyst in
the overall development of socio-economic conditions of the poor who have been kept outside
the banking orbit on the ground that they are poor and hence not bankable. Professor Muhammad
Yunus, the founder of “Grameen Bank” and its Managing Director, reasoned that if financial
resources can be made available to the poor people on terms and conditions that are appropriate
and reasonable, “these millions of small people with their millions of small pursuits can add up
to create the biggest development wonder.
Grameen Bank credit delivery systemhas the following features:
1. There is an exclusive focus on the poorest of the poor. Exclusivity is ensured by:
a. Establishing clearly the eligibility criteria for selection of targeted clientele and
adopting practical measures to screen out those who do not meet them .
b. In delivering credit, priority has been increasingly assigned to women .
c. The delivery system is geared to meet the diverse socio-economic development needs
of the poor.
2. Borrowers are organized into small homogeneous groups:
Such characteristics facilitate group solidarity as well as participatory interaction. Organizing the
primary groups of five members and federating them into centers has been the foundation of
Grameen Bank’s system. The emphasis from the very outset is to organizationally strengthen the
Grameen clientele, so that they can acquire the capacity for planning and implementing micro
level development decisions. The Centre are functionally linked to the Grameen Bank, whose
field workers have to attend Centre meetings every week.

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3. Special loan conditional ties which are particularly suitable for the poor. These include:
a. Very small loans given without any collateral.
b. Loans repayable in weekly installments spread over a year
c. Eligibility for a subsequent loan depends upon repayment of first loan
d. Individual, self-chosen, quick income generating activities which employ the skills
that borrowers already posses
e. Close supervision of credit by the group as well as the bank staff.
06.Micro Industry DevelopmentAssistance and Services (MIDAS):
Micro Industries Development Assistance and Services (MIDAS), a private sector organization,
promotes development of small enterprises with a view to generate employment opportunities. It
was formed with the financial support of USAID in 1982 and assisted till 1993. Now it is a self-
sustained counseling organization for the promotion of micro industries, which has the following
functions:
a. Collation and dissemination of information on small and micro enterprises,
b. Carrying out socio-economic studies and research,
c. Identifying industrial projects of innovative nature,
d. Promoting women entrepreneurship, providing technical, and
e. Managerial assistance in the form of counseling, and training to existing and potential
entrepreneurs.

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Chapter 6
Introduction to SMEs
06.01. Definition of SME
Small business is any business that independently owned and operated, is not dominant in its
own field and does not engage in any new or innovative practices. It is an integral part of the
total business scene in any country. It means the size of which is not big – the size again depends
on the yardstick one uses to measure.
06.02. Objectives of SME foundation
Aligned with the Memorandum of Association the objectives of SMEF could be listed as below:
a) To promote, support, strengthen and encourage the growth and development of SMEs.
b) To plan, program and finance interventions for delivery by private sector organizations.
c) To institute SME Awards in order to promote competitiveness among the SMEs.
d) To facilitate SME access to finance by creating and supporting appropriate strategies and
institutions.
e) To rationalize public sector approaches and support structures for SME development.
f) To create a pro-growth and pro-poor business environment.
g) To create appropriate incentives, mechanisms and support structures to facilitate the formation
of new enterprises.
h) To identify and report policy anomalies, market and institutional failures that are prejudicial to
the legitimate interests of SMEs.
i) To create a database on SMEs and SME sectors.
j) To encourage in building linkage among the national and international institutions working for
SME development.
k) To develop capacity of public and private sector SME service providers.
l) To enhance productivity,
06.03. Government policies of SME in Bangladesh
As a developing country to develop its economic status and to reduce the poverty rate, SME is
very important sector in Bangladesh. But unfortunately, until today Bangladesh could not make
separate SME policy to operate this sector significantly. Some very simple polices are included
in the industrial policy in 2005. These are the Industrial Policy-2005 states: “the SME sector has

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been given priority as a privileged sector”. The PRSP states: “The Government will pursue an
employment intensive industrialization with emphasis on SMEs and export-oriented industries”.
The Small and Medium Enterprise Cell (SMEC) was created in the Ministry of Industries (MOI)
in 2003, and was tasked to take specialist interest in SMEs’ development. October 2003 saw the
constitution of the SME Taskforce (SMETF), with the Principal Secretary to the Prime Minister
as the convener. The SMETF blended the Government, the private sector, academia and the civil
society as participants.
The Taskforce’s report was approved by the Government early in 2005. On the basis of the
report of the SME Taskforce, “the Government of Bangladesh issued Small & Medium
Enterprise Policy Strategies, 2005” to provide a framework for interventions and policy
strategies for the development of SMEs. The Government constituted a Small & Medium
Enterprise Advisory Panel (SMEAP) as an independent and meritocratic brains-trust for the MOI
for all developmental, technical and structural advisories in the name of SME development.
According to Industrial Policy 2005, there are special fiscal incentives for SMEs. Since
Industries will enjoy tax holiday facility for a period of 5 to 8 years depending on the locations;
Agro-processing and computer software industries will receive income tax relief for a fixed
period; Industrial enterprises engaged in the production of RMG will receive taxation facility at a
reduced rate of 10 per cent on their export income; Special revenue facilities will be provided to
industries marked as “thrust sectors”, SMEs and cottage industries; Industrial enterprises
registered with the Board of Investment need not pay any transfer fee; The Government is
committed to develop industrialization led by the private sector amid a business environment that
can bring out the best among all SME stakeholders It is also pointed out in the industrial policy
that Bangladesh government has taken initiatives to make separate SME policy. But when this
policy will be made and implemented it is a big question today.
06.04. Functions of SME Foundation
1. Implementation of SME PolicyStrategies adoptedby the Government of
Bangladesh
Implementation of the SME Policy Strategies adopted by the Government of Bangladesh is one
of the main responsibilities of SME Foundation. SME Foundation continuously assist the
government in core issues mentioned in the policy strategy like: recommend rational budget
structure for SMEs, advice on fiscal and financial issues, assist to ensure quality of SME
products, assist in capacity development, techno-entrepreneurship development at international
level etc.
2. Policy Advocacy & Research
Policy advocacy & research is one of the most important mandates of SME Foundation aims to
sustainable SME development in the country. The main activities of Policy Advocacy &
Research Wing are to facilitate for growing enabling environment to run SME business smoothly
in the country.

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3. Credit Wholesaling Program
Credit wholesaling is one of the major activities of SME Foundation to ensure easy access to
finance for the SME entrepreneurs. SME Foundation has already taken credit wholesaling
program as pilot scheme with its own fund. SME Foundation helps the SME entrepreneurs by
providing collateral free loan at 9% interest rate to the technology based potential SME
manufacturing industries along with agro-based industries.
4. Capacity Building & Skill Development
SME Foundation organize training program in public-private partnership module to enhance the
skill of SME entrepreneurs as well as to create new entrepreneur. Training programs like
entrepreneurship development, SME cluster wise skill based, technology based, ICT based, ToT,
productivity and quality improvement etc. are conducted by signing a MoU between training
institutes or SME related association.
5. Access to Technology
SME Foundation is committed to improve competiveness of SMEs through technology up-
gradation, adaptation of advanced technology, diffusion of appropriate technology, moving
towards reverse engineering, and compliances and product certification. SME Foundation is also
devoted to enable SMEs to energy efficient and environmentally sound.
6. Access to Information
SME Foundation provide update information and data through its own web portal
(http://www.smef.org.bd) to the government, planner, decision maker, executive, researcher,
investor, policy maker and to the SME entrepreneurs to establish new business or run business in
a profitable manner.
7. Women Entrepreneurship Development
Bring the women entrepreneur to main stream development process and facilitate them for
women empowerment is one of the prioritized activity of SME Foundation. Main activities are:
institutional capacity building of women chamber/ trade bodies, formulate gender action plan,
encourage bankers for finance to women entrepreneurs, conduct study on women entrepreneurs,
organize women entrepreneur conference, national SME women entrepreneurship award, SME
product fair for women entrepreneur etc.
8. Business Support Service
SME Foundation provides different kinds of business support service for entrepreneurship
development. These are: promotion and market expansion of SME product, establish linkage
between buyer and seller, provide advice and guideline with information support for new
business development, publish SME business manual, organize SME product fair etc.

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06.05. Role of SME on economic development of Bangladesh
The role of small and medium enterprises (SMEs) to economic development of a country is well
organized. Across the globe it is strongly perceived that SMEs do play vital role in the industrial
development, economic development of a country. Bangladesh is not lagging far behind in this
respect. SME has great opportunity in this country. Environment, cheap labor, business strategy
etc are the key features of SME.
In view all the favorable factors; there is an urgent need in development of SME in Bangladesh
as a developing country. SMEs are characterized on the basis of size, investment and employees
in most countries across the world. Here are small business are those which have employees less
than 50 person and have an investment of less than tk. 250 million.
Generally, hand loom, food processing, lather and tannery, ceramic, light engineering, electric
and electronic, handicraft, specialized textile and garments etc are fall in the category of small
and medium enterprise. There are also tens of thousands of small industries and a large number
of hand loom and power loom industries in this country. Commercial banks, other financial
institutions are working to promote the MSE sector, but their services and support are still
inadequate. Experts argue that all the institutions have to build up capacity and upgrade their
attitudes to provide appropriate and quick service to entrepreneurs. The government has already
given special attention to the promotion of SMEs sectors. Though government and others
financial institutions have given special attention to the promotion of SMEs sector, the
contribution of non-government organization in this sector is still poor. So it can be said that to
increase the contribution of SMEs on Bangladesh economy government, NGOs, commercial
banks, others financial institutions have to put great emphasize on SMEs sector in Bangladesh.
06.06. Present status of SME in Bangladesh questionnaire
This part is based on survey through questionnaires.
Table -01
Calculation:
Number of respondent: frequency
Ã-100
Question 01: Age of entrepreneurs
Responses Number of respondent Percentage
20-25
26-30
31-35
36-40
41-more
02
04
08
04
02
10%
20%
40%
20%
10%
Total 20 100%

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From the above table we can state that, 31-35 years people are more interested to do own
business like SME.
Table-02
Question02: Owners of SME are male or female
Responses Number of respondent Percentage
Female
Male
7
13
35%
56%
Total 20 100%
From above data we can conclude that male is more interested than female.

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