Effects of Access to Formal Finance to the MSMEs on Sustainable Employment Generation in Bangladesh

In recent years, MSMEs are playing very important role for the overall economic growth and development of Bangladesh. These MSMEs help distribute resources from macro level to micro levels of economy through employment generation and improved livelihood across the country. This study examines whether the access to formal finance has direct impact on the MSMEs in generating more employment opportunities in Bangladesh. The sample for this study contains data of local MSMEs which took formal finances in 2015 from private commercial banks. To understand the effect with relation sustainable employment, this study analyzes employment data of 2015 and that of 2018 for the same MSMEs regarding their full-time workers, full time skilled workers and full time low skilled workers by associating skill levels with worker information. The findings of the study clearly indicate that the access to formal finance to MSMEs in 2015 has aided to increase the employment generation in 2018 for full time workers. As for associating skill levels, access to formal finance has helped to increase employment for full time skilled workers whereas the effect is not significant for full time low skilled workers. Additionally, the study also suggests practical implications with regard to formal finance opportunities by private sector and its importance to uplift employment opportunities and provide training for sustainable employment and improved livelihood in Bangladesh’s economy.