MSMEs and economic growth: Fostering an entrepreneurial ecosystem in Bangladesh for sustainable development

Abstract

Micro, small, and medium‐sized enterprises (MSMEs) are fundamental to the economy of Bangladesh, significantly contributing to job creation and poverty alleviation. Securing financing is essential for the growth and development of the MSME sector. This research investigates the entrepreneurial environment in Bangladesh, highlighting challenges and opportunities to enhance youth entrepreneurship. By analyzing secondary data from 2010 to 2022, the study employs a multiple regression model to examine the statistical relationship between MSME financing and economic growth. Gross domestic product Regression Equation Specification Error Test per capita is the dependent variable, loans to MSMEs are used as a proxy for MSME financing, and the unemployment rate is included as a control variable. The results indicate that MSME financing has a substantial positive impact on economic growth, while the unemployment rate has a significant negative effect. The study suggests implementing blended finance funds and a variety of supply, demand, and financial solutions to strengthen the MSME ecosystem in Bangladesh, thereby supporting national development goals and sustainable development.