Hi, sorry for the delay. I'm not sure of the connector since my E36 is the M43 engine so the wiring may be different. If you can hook up a 12v test lamp to the connector, then turn the key to the crank position and see if the lamp lights, it may well be the starter solenoid connector. Try a 12v lamp with one wire connected to a metal part of the bodywork or the ground terminal of the battery, then the other wire to each of the wires in the connector in turn, followed by a crank test to see if the lamp lights.
Will check my engine when I get a chance to see if I can help identify the connector you have circled. It's possibly just there for an optional part that isn't fitted to your model, but it seems a good starting point.