Insights on Micro-Enterprises, SME Constraints, and Ultra-Poor Programs in Bangladesh

1. Synthesis of the Proceedings Imran Matin Deputy Executive Director BRAC International

2. Inaugural session Findings of the presentation • It is difficult to create employment using micro enterprises • There is gender variation in the extent to which cash and in-kind grants generate profit • Cash and in-kind grants also differ in their profit generation abilities • Women from the upper echelons of society are better able to generate profits • Training and capital grants together improve profit but not independently • Incentives increase enterprise registration, but registration only influences attitudes, not necessarily operations

3. Inaugural session Potential Issues for discussion • Definitional issues regarding micro-enterprises • Need to differentiate between necessity driven versus profit seeking enterprises. Necessity driven enterprises may not inherently grow • Need to distinguish between factor driven, innovation driven and efficiency driven enterprises

4. Inaugural session Potential Issues for discussion • What are the potential alternatives for impact assessment as opposed to RCT • Bangladesh’s stagnant macroeconomic environment poses a barrier to profit generation-ie, profit becomes a zero sum gain. Lack of protection measures such as bankruptcy laws and own savings measures can potentially increase the impact of failure on micro-entrepreneurs. How to foster an enabling macroeconomic environment for micro-enterprises?

5. Session 2: Constraints of SMEs Findings of the presentations • Bangladesh has a number of comparative advantages in the areas such as • having lower capital and intensity • use of local inputs thus creating backward linkages, • higher female employment creating minimum disruption of family life • smaller gestation period for enterprises • Demand side constraints include high interest rates, complex loan processing procedures and insufficient information regarding finance availability • Supply side constraints include high administrative costs, interest gap for excluded middle and insufficient access to technology

6. Session 2: Constraints of SMEs Findings of the presentations • Weak backbone of industrialization inherited since independence challenges SME growth in Bangladesh • Commercial banks do not prioritize lending to SMEs due to the lack of collateral and high transaction costs • BRAC Bank is one of the few in the country which actively addresses this issue with their SME programme

7. Session 2: Constraints of SMEs Potential issues for discussion: • How to develop linkages between micro and large enterprises as well as between enterprises and large training houses • How to make the government be open to taking ownership of the products the country produces and adequately promote them in the foreign markets • How to increase SMEs’ access to commercial banks?

8. Session 3: Evaluation of Ultra poor programmes Findings of the presentations: • Grant-based approach appears to be an innovative way to address the extreme poverty • Randomized evaluation design was used to assess the BRAC’s CFPR/TUP programme implemented in Bangladesh and Bandhanprogramme implement in India and showed that: • Both of the evaluations find solid impacts on income and food security, vulnerability, and generating productive asset base • Strong evidence of spill over effects

9. Session 3 Potential issues for discussion • Can ultra-poverty be sustainability reduced through a grant-based approach? • Cost-benefit analysis and relative effectiveness of different types of grant-based approach • Can safety nets be designed to enable entrepreneurship through community level structural changes? • Is it feasible to attempt coordinating resources from NGOs and the government to better serve the poor? • How do we define graduation of the ultra poverty targeted by different types of safety net programmes? • Is grant-based approach necessary for all groups of ultra poor?