Listing of SMEs in Capital Market for Financing: Challenges and Way Forward

Small and Medium Enterprises (SMEs) comprising over 80% of all business entities and playing a crucial role in employment generation and GDP growth. Despite their significance, SMEs continue to face major challenges in securing affordable financing, largely relying on traditional bank loans with high interest rates. In an effort to bridge this financing gap, the Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) launched dedicated SME boards in 2019 and 2021, respectively, aiming to offer SMEs access to capital markets as an alternative funding source, but remains limited. To explore the specific barriers hindering SME listings, a mixed-method approach followed that combines a quantitative survey (156 respondents) and interviews (5). The results reveals that nearly 60% of SMEs are unaware of the existence of the SME boards, while 88% lack sufficient understanding of the listing requirements. Regulatory complexity, high compliance costs, low financial literacy, and diminished investor confidence emerge as major impediments. Notably, the study identifies strong interest among SMEs in capital market financing, suggesting that the gap lies not in willingness but in the accessibility and feasibility of the listing process. To address these challenges, the study recommends campaigns to better connect SMEs with capital market opportunities.