How to overcome barriers to green and inclusive growth in Bangladesh
Greening and inclusiveness can be ensured by taking appropriate measures, regardless of business size. However, green and inclusive SMEs and agribusiness can accelerate this growth in Bangladesh
Innovative technologies, products, services and business models are needed to realize the synergy between inclusion and greening businesses. Obstacles in the way of green and inclusive business enterprises can be political, technical, financial or managerial.
Based on global cases and experiences, recent literature focuses more on barriers associated with supportive policies and incentive structures, bureaucracy, conventional thinking, and resistance to change from old practices.
Greening and inclusiveness can be ensured by taking appropriate measures, regardless of the size of businesses and enterprises. Greening and inclusiveness are already visible in industries like RMG in Bangladesh.
However, it is micro and small enterprises and small entrepreneurial activities in the agricultural sector that play a remarkable role in maximizing the benefits of green and inclusive businesses in Bangladesh. The contribution of small businesses and the agricultural sector is particularly crucial in the developing world. Low-income and rural residents have a remarkable engagement and association with these businesses.
Agriculture is a major economic driver in Bangladesh. Even though the sector’s contribution to GDP has decreased (around 14%) over time, the rural population is still engaged in it. Despite the decline in growth rate and contribution to GDP, the productivity of agriculture has increased significantly and that is why the country is now self-sufficient in food production, and agricultural exports have also increased during the last decade.
The contribution and productivity of the agricultural sector is associated with the food security of the country, which employs nearly 40% of the country’s labor force. The industry is also a significant contributor as a supplier of raw material sources for other sectors, such as poultry and livestock feed, leather, frozen foods, canned foods, etc. It is at the heart of Bangladesh’s economy and plays a vital role in poverty reduction.
Climate change poses risks to agricultural production, and there are several challenges associated with value chain and marketing, financing, and process development without harming the environment. As a low-lying country on a delta, Bangladesh can expect increased flooding, saltwater intrusion, drought and other natural disasters.
According to one estimate, Bangladesh is losing about 1% of its arable land every year – faster than its population growth. For food security reasons, it is imperative for farmers to deploy innovative and sustainable practices.
The potential of the sector is evident with Bangladesh among the top 10 producers of several agricultural products. Globally, food demand is expected to increase by 60% by 2050.
Financial viability is crucial for the bulk of the country’s low-income agricultural producers and for attracting skilled entrepreneurs to the sector. By ensuring inclusiveness and greenness in the agricultural sector, its full potential can be exploited and the benefits can also be maximized.
Despite remarkable development, the agricultural sector has not reached its full potential, facing challenges such as fluctuating food prices, natural disasters, supply chain disruption, international market volatility , etc. There are opportunities to improve agricultural productivity.
The pandemic has dealt the biggest blow to the country’s agricultural productivity and, according to an estimate by Brac, four key sectors of agriculture, fisheries, poultry, livestock and crops and vegetables have lost an income of about Tk 656 billion ($6.7 billion) on the Covid-19 crisis.
The absence of a strong supply chain and a fragmented commodity market is a deterrent to farmers and agricultural producers. Over-reliance on high-yielding seeds that lead to loss of soil fertility and land fragmentation are also obstacles. Despite remarkable efforts and contribution from the central bank, banks/NBFIs and microfinance institutions (MFIs), barriers to accessing institutional finance remain a challenge.
In many cases, agricultural producers are not using modern methods of agricultural production due to a lack of awareness and technical support regarding the proper management of water resources, irrigation, use of fertilizers and chemical pest control. Producers have a lack of technology and knowledge when it comes to converting raw products into high value processed foods for greater benefits.
Migration from rural to urban areas and from agriculture to non-agriculture could prove to be great challenges if the sustainability of the agricultural sector is not ensured. Poverty, food insecurity, lack of jobs, climate change and environmental degradation are among the root causes of migration.
Agricultural credit facilities need to be strengthened, but demand-side challenges are the main obstacle to accessing green and inclusive central bank finance measures to support marginal farmers, landless farmers and sharecroppers.
Inclusive agribusiness should strive to achieve food security and food security where rural income people are involved both as consumers and participants in the production process. The benefits of inclusive business include higher profitability, greater market share, lower operating costs, new consumers, better product marketing and ease of doing business.
The benefits for the poor are jobs and income opportunities, increased market access, women and gender empowerment, access to innovation and technology, and better access to credit. Adopting an environmentally friendly approach is associated with addressing climate change issues and safe and healthy production. Such green and inclusive agribusiness directly contributes to green and inclusive growth – Bangladesh’s key macroeconomic objective.
The contribution of SMEs is well recognized in developing countries like Bangladesh. SMEs are a very important economic force in a developing country because of their tremendous role in creating jobs, contributing to export earnings, alleviating poverty and stimulating product innovations. Given its importance, policy makers in almost all economies have undertaken policies and strategies to promote SME sectors.
In emerging economies, SMEs contribute about 40% of GDP and create 7 out of 10 jobs. million businesses that contribute nearly 25% of the country’s GDP.
A significant number of these entrepreneurs turned out to be women who play an important role in reducing poverty and unemployment. The contribution of SMEs is also significant to the expansion of the country’s exports. RMG’s export share is about 83% of total exports, and a good number of RMG’s factories are small factories, and SMEs are also involved in manufacturing various kinds of garment accessories.
A significant share of workers’ remittances goes to the SME sector. The families of most migrants live in rural areas, and some of these vast remittances are channeled into productive SME investment activities that engage local communities and stakeholders.
SMEs can contribute to poverty eradication by creating employment opportunities for villages and complementing entrepreneurship in the agricultural sector. In doing so, they can help improve the rural economy. Readily available raw materials and local resources can be used by SMEs.
Sometimes SMEs play a role in big industry; waste and unused materials from large industries are often used by SMEs as raw materials. The planned development of SMEs could prove to be a remarkable force for improving inclusion and green growth.
As in most other developing countries, SMEs in Bangladesh face a number of inherent challenges, including insufficient access to market and start-up capital; lack of bankable attributes; lack of collateral security; diseconomies of scale; and be highly vulnerable to trade and economic turbulence.
SMEs usually use local technology to produce goods, but these are not productive enough to meet market demand, therefore many SME entrepreneurs lose their livelihoods. Low productivity and lack of modern skills and knowledge of technology and marketing are said to be common difficulties for SMEs in the country.
Business development of SMEs in clusters could help solve a number of these problems. Clustering is a recognized strategy for strengthening and consolidating SMEs by promoting interconnection, competition and cooperation.
In business development of cluster-based SMEs, policy and operational coordination would help drive innovations, manage resources efficiently, ensure access to finance, promote marketing and supply chain, and can contribute to meeting environmental and social challenges.
The policy framework is particularly crucial for managing barriers to green and inclusive businesses. Policymakers are important to provide physical infrastructure, as well as regulatory frameworks that are stable and secure, but flexible enough to allow room for experimentation.
Market mechanisms can be influenced by designing subsidy and incentive schemes for green and inclusive innovations, and to enable actors to achieve market-scale strategies and economies of scale. And it is also about facilitating cooperation and partnerships to fight against barriers. Coordination efforts and partnerships can crucially support this process – driven by actors such as intermediaries and grassroots entities, donors and policy makers.