Factors Influencing the Development of Microenterprises and Policies - Evidence from Bangladesh

Abstract

MSMEs add dynamism and flexibility to the economy by way of new firm formation, contribution to competitive forces resulting in higher efficiency, and by faster and less expensive adjustments to economic shocks. Considering the role as an engine for economic growth in the future world, small andmedium enterprise facilitation and development has received special attention of the researchers, academicians, practitioners, and the policy makers. But it is worth noting that microenterprise development is yet to receive its due focus and importance. Myriad of literature suggests that there are a number of problems and challenges in its development both at the macro and micro level that make these enterprises successful or failed (Eversole, 2003; Sengendo et al. 2001; Rudaheranwa 2000, 2006;Wood and Jordan 2000). In light with the global experiences, this paper tries to identify the factors that work as challenges or as auxiliaries in the development path of Microenterprises in Bangladesh by analyzing thirty field level detailed surveys and cases critically. Findings suggest that Integrity and hard work, relevant experience, adequate training and financing, presence of business acumen, and entrepreneurship motive have been critical among a range of factors identified that leads an enterprise to be successful while inexperience and lack of training, overburden of liability, misuse of credit, inability to cope with risky environments, and irresponsibility contribute the most among all factors in the failure of the Microenterprises. This paper also makes an important observation that more than seventy five percent of the successful Microenterprises are developed and operated by women. This paper outlines some inevitable policy responses that are critical to the development of Microenterprises such as ensuring risk sharing approach, lateral entrance, micro insurance, capacity building and access to finance.