How many of us have ever considered the importance of the entrepreneurs we encounter daily, be they street vendors, vegetable growers, or milkmen? All of them are owners of microenterprises. Although the name gives an idea of something small, it is a smaller business size, impacting far more than a layperson may imagine. Microbusinesses of microenterprises (ME) are characterized by their limited workforce, often fewer than ten employees. Typically, these establishments are owned and operated by people or familial entities.
Role of microenterprises in the global economy
Microbusinesses play a crucial role in the global economy by playing a vital role in making way for job creation, poverty reduction, and promoting entrepreneurial activity. Research shows that Micro and Small Enterprises (MSEs) contribute to over 55% of the Gross Domestic Product (GDP) and generate employment for over 65% of the workforce in high-income nations. However, it is estimated that a majority of the GDP, over 60%, and a significant portion of employment, over 70%, in low-income nations is attributed to MSEs, regardless of their formal or informal nature (Small and Medium Enterprises Finance, 2023). According to Kongolo (2010), middle-income nations rely on these sectors for around 70% of their GDP and 95% of their total employment opportunities. According to the United Nations Industrial Development Organization (UNIDO), a group affiliated with the United Nations, MSEs constitute over 90% of private firms, accounting for more than half of total employment and GDP in most African nations (Small and Medium Enterprises Finance, 2023)
Importance of microenterprises in saving the environment
We all know the global economy is going through a tough time. How MEs adjust to these changes will significantly affect job prospects. In the global growth agenda, the Sustainable Development Goals (SDGs) stress how important it is for different plans for growth to work together. Considering MEs' vast role mainly in the informal sector, providing jobs for the rural and disadvantaged people, if countries want to achieve SDGs, they must ensure MEs become carbon neutral, use resources efficiently, and manage natural resources well. Microenterprises need to handle and get rid of their waste correctly. It is getting worse day by day. In a world where the environment is worsening, microenterprises can play a crucial role in helping to protect the environment and encourage eco-friendly actions.
Microenterprises in Bangladesh
If we look at the available statistics, we see microenterprises account for a significant share of employment and economic activity in Bangladesh. According to the Bangladesh Bureau of Statistics, microenterprises employ over 75% of the country's workforce and contribute over 30% of its GDP. Approximately 50% of the population in Bangladesh relies on the revenue generated by over nine million microenterprises for their livelihood. Microbusinesses are essential in the country's efforts to adopt environmentally sustainable practices.
The nation has significantly benefitted economically from the manufacturing and agro-industries quick expansion. However, this growth has also resulted in detrimental consequences such as environmental pollution, including air, land, and water contamination, and the rapid degradation of natural resources. According to a survey conducted in 2014, a mere 6% of microenterprises were found to engage in appropriate waste disposal practices. Undoubtedly, such pollution inhibits the growth rate, and Bangladesh requires initiatives to address the problem. The Sustainable Enterprise Project (SEP), a joint initiative by The World Bank and the Palli Karma Sahayak Foundation (PKSF) in Bangladesh, is one of those very few initiatives that aims to promote environmentally sustainable practices among microenterprises (MEs). (Begum, Talukder, Rahman, Das, Bhattacharjee, & Miah, 2022)
Making MEs go green: The SEP initiative
The SEP focuses on enhancing the adoption of eco-friendly technologies, improving marketing strategies, and building brand development capacity for MEs in agribusiness and manufacturing clusters. SEP, implemented by PKSF, collaborates with over 60,000 microenterprises, striving to integrate environmental protection into this sector. Through strategic interventions, the project has made significant strides in mitigating environmental issues and reducing pollution.
The project identifies crucial services to boost the productivity of microenterprises, irrespective of their commercial feasibility. It encourages investments in shared or community services such as design labs, artificial insemination centers, tissue culture facilities, micro-storage options, and organic composting services to enhance soil fertility.
Moreover, SEP promotes environmentally sustainable practices within clusters by facilitating low-pollution, eco-friendly businesses. The project supports microenterprises through eco-friendly investments in agribusiness and manufacturing sectors, focusing on energy, water, and resource efficiency. This approach aims to promote green technologies and practices among microenterprises operating in environmentally vulnerable areas, foster changes in micro-lending practices, and ensure the adoption of basic operational safety standards in project-backed enterprises. The project encompasses 30 sub-sectors, including automobile workshops, dairy farming, handicrafts, poultry, rice mills, and more, operating across over forty districts in Bangladesh. SEP aims to drive positive change in microenterprises, fostering a more sustainable and environmentally conscious business environment.
Challenges in making MEs go green in Bangladesh
Our empirical research as part of the SEP project of PKSF suggests that microenterprises in Bangladesh most often pollute more than they should for several reasons. Collective Intelligence workshops conducted in four different parts of the country involving MEs from all over the country identified a few key challenges. Firstly, most MEs don’t have modern equipment that could produce less waste.
If we take the example of leather industries, almost all the micro-entrepreneurs still use traditional methods to cut raw leather for producing goods. While visiting Bhairab, where at least 1000 MEs are clustered around a single locality, we haven’t seen a single entrepreneur using modern leather goods design and cutting machines that could significantly produce less leather wastage. Only MEs under the SEP project have started to use modern cutting technologies under a common service facility. Moreover, as leather waste disposal requires special treatment and setting up treatment facilities requires huge investment, it is almost impossible to ensure environmental sustainability without government investment. Unfortunately, we don’t see any such initiative yet. Secondly, most MEs are not ready in many sub-sectors to adopt new technologies and environmental practices even though new technologies are available or they could easily adopt environmentally sustainable practices.
For example, in the aquaculture sub-sector of Satkhira, a group of entrepreneurs reported that they don’t use probiotics as an alternative to antibiotics because probiotics require more intensive care of the fish. Thirdly, consumers are not ready to pay the extra cost required to make environmentally sustainable good production profitable. For example, a Jamdani sari producer from Narayanganj suggests that producing a sari in an environmentally sustainable way would cost at least Tk500 more. Still, buyers are not ready to pay the extra money. This also points towards the fourth problem: The consumers are not ready to pay even more to ensure better, healthy, sustainable products. Consumers' not-paying-more attitudes, in turn, points towards the fifth problem related to branding. While researching with the consumers, we found many consumers eager to pay more for sustainable products don’t do so due to the lack of trust in the products. It can be said confidently that most MEs are very poor in marketing their products. There is also a need for a third-party certification to build trust among the consumers.
The sixth problem that we found is related to government policy support. Many of the existing policies do not support the MEs to go green. For example, although the government plans to ban brick production from 2025, most of the government purchases do not quote the use of concrete blocks as an alternative, and even in some places, new brick factories have started to operate within the last few years. This means many MEs producing concrete blocks still search for markets to sell their products. A vermicompost producer from Jessore reported the same problem. He produces a few tons of vermicompost, but his products remain unsold. He blames the government policy for this, as there are no government incentives, whereas the government promotes chemical fertilizers. He opined that vermicompost, together with chemical fertilizer, could produce the best output for crops but government offices are not helping growers like him.
Way forward
There are so many things that need to be done. But at least four immediate steps can help MEs to go green. Firstly, we need vast consumer awareness. After talking with at least a hundred MEs over the last month, it became clear that consumers must be aware of the health hazards they expose themselves to daily through consuming different products. They must understand if they want to have safe products as consumers, the time is now to know who is producing safe products and be ready to pay at least some extra money to start.
One way to solve this value chain problem is to contact the farmers directly. SEP is currently trying to intervene in the value chain and help the MEs use new technologies to sell their products directly to consumers. Although all kinds of products would not be sold directly to the consumers this way, most consumable products could be sold. If consumers looking for safe products (and organic products) become aware of such initiatives and start to search for safe products in the online marketplaces that many NGOs working with the SEP have already established, MEs could have a better price by selling their products directly to them. Secondly, MEs require access to working capital with low-interest loans as they don’t have much capital. It becomes challenging for them to have the basic infrastructure in machinery, buildings, technological support, etc, to run their operations and effectively enable green practices.
They generally have minimal access to bank financing, mainly because banks do not consider microenterprises as potential clients and the cost of making such small loans is prohibitively high. Thirdly, the MEs require training on new technologies and acquire new skills. Because a shortage of skilled workers makes MEs fragile and negatively affects their performance. If the workers become skilled, adopting different methods would be less time constraint. Fourthly, the government should take immediate steps to have proper policies in place so that sustainable practices and products produced should get government policy support and dominate the list of government purchases. In Thakurgaon, the LGED had already replaced the use of eco-blocs in place of bricks, which greatly boosted the eco-block-producing sector under SEP.
Initiatives like this should be taken at the government level by the intelligent, courageous and ready-to-go green bureaucrats -- after all, they make the decisions. (Microenterprise Development Project: Report and Recommendation of the President, 2018).
Dr Sayed Saikh Imtiaz is Professor, DWGS, at the Dhaka University. Dr Ifterkharul Amin Shatil, is Professor, IBA, Dhaka University.