২০/১২/২০১৯ Prospect of SME banking in Bangladesh

Prospect of SME banking in Bangladesh

Muhammed Zahirul Alam | Friday, 15 February 2019

The small and medium enterprise (SME) loan means financing

provided by financial institutions in small and medium
industries. Financial institutions provide loans to small and
medium industries for arrangement of working capital,
business expansion and capital machinery procurement. In
order to take forward the SME sector in Bangladesh and
implement SME loan management and special initiatives in
this sector, Bangladesh Bank introduced a new division named
SME and Special Programme Division on 31-12-2009. The
SME and Special Programme Division has taken a number of schemes, programmes and policy initiatives
for the development and expansion of small and medium enterprises.
In the light of the SME and Special Programme Division Industrial Policy-2010, on June 19, 2011, the
inclusion of SMEs for bank/non-bank financial institutions is given below:
Bangladesh Bank and SME Foundation have taken a number of schemes and programmes to ensure facilities
including funding for the development and expansion of SME institutions. Various commercial banks and
financial institutions are coming forward to fund SME institutions. It has been playing a significant role in
raising economic growth, employment generation, creating new business sectors, reducing poverty, reducing
rich-poor divide and regional discrimination, ensuring equality of women and empowering them.
The importance of small and medium industries in the development of a developing country like Bangladesh
is immense. Currently, most industries in the country are covered by the SME sector. In addition, to achieve
the ability to produce import substitute products, its role is also increasing rapidly.

Bank Asia SME has already taken a number of schemes and programmes to create entrepreneurs and
enhance the skills of entrepreneurs. Currently, the bank is in agreement with the Bangladesh Bank, the SME
Foundation, the IDA and the ADB in relation to the repatriation fund for the development of Asian SME
sector. Apart from this, various steps have been taken for the purpose of providing loan on easy terms,
setting up Agent Banking, SME /Agriculture Branches, introduction of UFFPs, introduction of special
facilities for women entrepreneurs and introduction of special facilities for women entrepreneurs.
For example, the Bank Asia has taken measures for SME entrepreneur creation, skill development and
development of entrepreneurs. The measures are as follows:
* In each branch of Bank Asia, a separate SME help desk and women entrepreneurs are employed to provide
special benefits.
* SME/Agriculture Branch has been established for expansion of SME business.
* Special loans for women entrepreneurs in small and medium industries have been introduced. A women
account system has been started where women are getting the loan facility on easy terms.
* Bank Asia is committed to promote sustainable and competitive facilities through innovative development,
technological advancement and expansion, enhancing the efficiency of entrepreneurs and marketing the
products across the country under the Cluster Development Policy.Under this programme, loans for electric
and electronic, cooling, weaving industries, jamdani sarees, bamboo and bin, ready-made garments, potteries
etc. were given to the cluster.
* Banks are giving loans through the complete uprising system as the first financial institution in Bangladesh
to provide fast funding to Asian SME sector. In this process, loans to more than 4,000 small entrepreneurs
have been added which adds a new dimension to banking services.
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২০/১২/২০১৯ Prospect of SME banking in Bangladesh

* Employment opportunities for two thousand and more than five hundred educated youth have been created
in the rural areas through Agent banking activities. Apart from this, it has been possible to provide banking
services to the marginalized people through Agent Banking Channel, which has been instrumental in
achieving the growth of the rural economy.
* With the aim of expanding the small and medium industries, the Bank has taken measures to showcase the
products of the customers in the fair of Asia, which is an important role in the product marketing of
customers.
* To promote the business management of cottage, micro and small entrepreneurs, the bank is generating
income from the Asia-based entrepreneurship development wing.
The role of small and medium industries in the overall economic development of developing countries like
Bangladesh is undeniable. Because of the shortage of labour and production time is short, it is able to
contribute rapidly to increase national income and create jobs. The elimination of extreme poverty and the
role of women in this field can play a pivotal role in equality and empowerment of women. SME sector is
playing an important role in the economic development of many prosperous countries of Asia. Our
neighboring countries are also focusing heavily on SMEs. The SME is the employment generating machine
that can be a tool to achieve economic growth, reduce income discrimination, and reduce poverty. In our
country, SME funding is expanding in various industrial factories and business commerce. Presently, the
contribution of 25 per cent is made by the SME sector to the GDP of the country. Since the employment of a
large number of people is being created for managing the organisation, it is certainly possible to eliminate
unemployment by giving loans in this sector.

SME loan constraints:

* Lack of customer's business
related account.
* The inability to bear the risk
of the business of the customer
* Absence of business
succession.
* Long term lending sanction.
* Lack of adequate security.
* Non-cooperation and timekeeping
of the authorities to provide
necessary documents for
conducting business.
* Lack of business related training.
Solution:
lMake the entrepreneurs
aware of
saving the business contracts
properly.
* Increase the competitiveness of the entrepreneurs and ensure sustainable development.
* Reduce the risk of the business, start the insurance system.
* Succeeding a single service center where entrepreneurs get different approvals.
* Support the development of the working environment of small and medium industries.
* Providing information services related to marketing SME products in local and international markets.
* Support of SME entrepreneurs for mutual relations development and assistance in building bridges and
establishing interconnection between SME entrepreneurs and consumers.
* Encouraging the banks through introduction of Credit Guarantee Scheme facility.
If there is any right after the five basic rights of the people that is the right to get banking services. There are
a lot of financial institutions to entrepreneurs who have overcome through their hard work and efforts
numerous obstacles from the marginal stage. Entrepreneurs of this stage cannot meet the requirement of their
business by taking loans from moneylenders and NGOs. Besides, due to shortage of accumulated deposits
and long concurrence of the loan process, financial institutions are deprived of necessary banking services.
The following measures should be taken:

* Develop a digital platform to increase the scope of business of entrepreneurs based on entrepreneurs from
which the buyer can easily contact each other.
* The establishment of a Region Based Dairy Museum (Chilaar Plant) with the help of the Social
Development Local and Foreign Assistance Organization, which will guarantee the collection and sale of
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২০/১২/২০১৯ Prospect of SME banking in Bangladesh

small entrepreneurs' products in the dairy production industry.

* In order to increase the sales of entrepreneurs' products through internet, e-commerce system has been
established to provide customers with such an organization.
* Under the Credit Guarantee Scheme, funding of entrepreneurs by local and foreign aid organizations.
Above all, financial lending institutions will come forward to create new entrepreneurs and will provide
necessary suggestions for their business or industry's success and supervise the post-lending debate. In this
regard, all concerned, such as government, private, semi-government, autonomous and related licensing
organisations, all financial lending institutions, have to adopt liberal policies.
All concerned must understand that SMEs' development is the biggest means of development and
employment of the country. SMEs will create self-employment and employment opportunities for others. It
should be kept in mind that those big businessmen or industrialists of today were also small once. Today, the
small businessmen or industrialists have built a large number of industrial empires through hard work and
persuasion.

The writer is Deputy Managing Director - Small, Medium and Retail Banking at Bank Asia Limited,
Corporate Office, Dhaka.

Editor : Shah Husain Imam

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