The Role of Non-Banking Micro Finance Institutions in Micro Enterprise Development: A Case of Bangladesh

Abstract

Micro Enterprises (ME) are considered as the major sources of employment creation. Global experiences show that an efficient ME sector is conducive to industrial growth and a flexible industrial structure, which are the cornerstones of a vibrant entrepreneurial economy. This is very important for developing countries (DC) as they have severe unemployment problems. Current studies show a strong link between entrepreneurship and economic development (ED). DCs have begun to realize the necessity of encouraging entrepreneurship to achieve their ED goals. But, they don’t have sufficient capital and advanced technology like the advanced countries. As a result they need to depend on small scale enterprise development based on local technology. A list of government and nongovernment organizations such as BSCIC, SMEF, PKSF, different nationalized and private banks and non-banking micro finance institutions (NBMFIs) have been working in Bangladesh for ME development (MED). Despite their efforts and the importance of MEs towards national economic development, they still face different types of problems and challenges in Bangladesh. Current studies show that the lack of appropriate policies and programmes, challenges of business entry, survival and growth, the availability of financial resources, and complicated and bureaucratic environment of the financial institutions present major obstacles towards MED in Bangladesh. Moreover, financing systems are not fully supportive to all categories of MEs. As a result expected development of this sector is not cropping up.