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IT IS now collectively and unequivocally recognised that entrepreneurship plays a critical role in socio-economic development and the broader advancement of human civilisation. In particular, micro, small, and medium enterprises (MSMEs) contribute significantly to economic development, especially in developing nations. Yet, in countries like Bangladesh, the MSME sector remains poorly structured, loosely defined, and riddled with institutional constraints and limited access to essential resources.

Bangladesh is currently navigating a bumpy road in its quest for national stabilisation and recovery from the deep social and economic terrible damage inflicted by the previous regime. Every day brings new challenges — obstacles emerge from virtually every segment of society. Despite these difficulties, the interim government appears committed to addressing long-overdue and urgent issues. Among these are efforts to recover illegal looted wealth stashed abroad and to prosecute individuals accused of crimes against humanity. One recent development that drew significant public attention was the Investment Summit 2025, organised by the interim government. Leveraging the global reputation and goodwill of Nobel Laureate Professor Muhammad Yunus, the summit was well-received and considered a positive step forward.

However, questions remain about its long-term impact. Can such initiatives ensure sustainable foreign direct investment (FDI), or was this simply a well-staged event with little follow-through? The reality is a bit daunting. Bangladesh’s FDI landscape has long suffered from systemic dysfunction — bureaucratic bottlenecks, policy inconsistency, corruption, and a lack of investor confidence. Without addressing these fundamental flaws, it is hard to believe that summits, no matter how well-intentioned, will lead to meaningful inflows of foreign capital. Should we then just wait for the FDI or should we first fix what’s already in our hands — the MSME sector?.

To lay the foundation for broader socio-economic development — and to attract meaningful foreign direct investment — Bangladesh’s MSME sector must be well-structured, nurtured, and allowed to flourish. A developed MSME ecosystem serves as the foundation of authentic, organic economic growth as well as for the FDI. It can also position itself as a vital player in creating backward linkages for large foreign companies. When foreign investors observe a robust and reliable MSME base, they are far more likely to invest, knowing that a strong local supply chain (backward linkage) already exists.

Apparently, the scenario of the MSME sector in Bangladesh is not very tempting. The MSME sector in Bangladesh contributes only 25 per cent to the GDP. There are many countries in which the MSME sector contributes more than 40 per cent to the national GDP. In many countries, the micro, small, and medium enterprises sector plays a critical role in GDP contribution and employment generation. For instance, MSMEs contribute 63 per cent of Italy’s GDP, 60 per cent in Indonesia, 58 per cent in Cambodia, 40 per cent in Kenya, and 29 per cent in India. In stark contrast, Bangladesh’s MSME sector contributes only 25 per cent to its GDP — placing it among the lowest tiers globally. Even in the countries which have a similar GDP per capita as Bangladesh ($2528), like Nepal ($2700), Pakistan ($2500), India ($2388), Kenya ($2200), and Cambodia ($1800), the contribution of the MSME sector to the GDP is much higher than Bangladesh. Yet paradoxically, this same sector accounts for 87 per cent of the country’s employment, according to official figures. This imbalance is noteworthy.

That MSMEs contribute only 25 per cent to Bangladesh’s GDP while shouldering a staggering 87 per cent of national employment is concerning. The high employment in this sector is not transforming to economic output. It illustrates one thing clearly: we have built an economy on the backs of millions of underutilised, informal, and low-productivity workers. In a plainer word, MSMEs employ a massive portion of the workforce, but their economic output per worker is very low. The sector is largely manual, informal, and low-tech, relying more on human labour than machines or innovation. Most importantly, a significant portion of MSMEs operate outside the formal economy — they’re unregistered, untaxed, and lack access to financial systems. Their output often goes unrecorded in GDP statistics. It is concerning because this imbalance indicates high underemployment, persistent poverty in rural and semi-urban areas, and systemic neglect — of innovation, technology adoption, and formalisation in a sector that should be powering our next phase of growth. In any serious economy, such a mismatch would trigger alarm bells.

The figure created by the writer based on the data from the World Bank and UNDP denotes that Malaysia and Germany have a good balance of the contribution to the GDP and employment by the MSME sector.

Hence, much needs to be done to truly develop the MSME sector in Bangladesh. In many countries, dedicated and highly functional SME development authorities are in place — such as those in Singapore, Malaysia, and the UAE. Some nations, including South Korea, India, Indonesia, and Italy, have gone a step further by establishing dedicated ministries for the MSME sector.

Recently, the SME Foundation of Bangladesh introduced the National SME Policy 2025. However, it appears to be little more than a mirror of the previous National SME Policy of 2019. There is little evidence of meaningful policy innovation, forward-looking reform, or inclusion aligned with the future vision of Bangladesh. Shockingly, the most recent statistics available on the SME Foundation’s official website date back to 2013, a glaring example of institutional stagnation. The SME Foundation must be revived and elevated to meet international standards. If we are serious about increasing the MSME sector’s contribution to GDP and making its employment base more productive, several actions are urgently required: a nationwide push for formalisation, expansion of microfinance and digital banking access, promotion of low-cost automation and digital tools through public-private partnerships, development of market linkages, and integration into global supply chains. In short, Bangladesh needs a modern, dynamic, and up-to-date structural reform of its MSME sector — and it needs it as soon as possible.

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Dr Syed Abidur Rahman is an associate professor, College of Business Administration, University of Sharjah, UAE, and an associate faculty, OYA Graduate School of Business, UUM, Malaysia.