Introduction In almost every part of the world, limited access to finance is considered a key constraint to private sector growth. This is especially true for SMEs of our country as they are facing different types of problems for availing institutional finance though SMEs play dominantly important role in the national economy of Bangladesh by making up over 90 per cent of industrial enterprises, providing employment to 4 out of 5 industrial workers and contributing to over one-third of industrial value-added to gross domestic product (GDP). The relative SME share in manufacturing value-added is much higher and estimated to vary between 45 to 50 per cent of totaling value-added generated by the manufacturing industries sector. Further as important sources of new business creation and developing new entrepreneurial talents, these industries provide the much needed dynamism and vitality to the national economy. Implementation of poverty alleviation action programs and strategies is a systematic and continuous effort in Bangladesh. For that purpose, the Poverty Reduction Strategy of the government has clearly identified some core principles and parameters both at macro and micro levels for reducing the existing poverty level at least half within 2015 as targeted Mr. Md. Shamsul Alam, MA, MBA is APS -1 to the Hon’ble Prime Minister, Government of Bangladesh and Mr. Md. Anwar Ullah, M.Com, MBA, ACMA is a Senior Assistant Secretary, Ministry of Establishment, Bangladesh Secretariat, Dhaka. The opinions expressed in the article is of the authors’ own. They do not represent the opinion of the Government or the departments to which the authors belong to. SMEs in Bangladesh and Their Financing : An Analysis and Some Recommendations Md. Shamsul Alam Md. Anwar Ullah Abstract: Small and Medium Enterprises (SMEs) are accounting for 25 percent of GDP, 80 percent of industrial jobs, and 25 percent of the total labour force in Bangladesh even though the prospective sector gets negligible facilitation from different support service providers. There are various constraints that hinder the development of SMEs in Bangladesh, such as lack of medium to long-term credit, limited access to market opportunities, technology, and expertise and business information. Lack of suitable incentives, inefficient and limited services from relevant government agencies as well as poor capacity of entrepreneurs are other reasons for the slow growth of SMEs. Obviously, the government has many things to do to flourish the SMEs because, if they flourish, SMEs will create new entrepreneurs, generate more jobs and contribute to a great extent to the national economy. This paper is an academic analysis toward policy formulation in respect of SME financing. Keywords: SMEs, Institutional finance, Government initiatives. The Cost and Management Vol. 34 No. 3 May-June 2006, pp. 57-72 57 ISSN 1817-5090