The Bangladesh Bank (BB), the country’s central bank, has have taken a number of initiatives to promote small and medium enterprises (SME) lending, says BB Governor Atiur Rahman
In our country, 90% private sector enterprises are SMEs. 70 to 80% of the non-agricultural workforce in our country is working at SME sector. SMEs have a significant role in generating economic growth and job opportunities. SME sector of Bangladesh contributed up to 25% of Bangladesh's GDP last year. about 40% of gross manufacturing output, and around 25% of the total labour force in Bangladesh belongs to SME sector. They also make a significant contribution to exports. Uniquely, SMEs are also geographically widely distributed so they offer a good prospect for geographic diversification of the economy.
Bangladesh Bank, along with other relevant Ministries, and financial sector have been working relentlessly for the development of SME sector. The establishment of SME & Special Program Department, a separate department in Bangladesh Bank and the service provided through this department for further development of the SME sector is an evident of our efforts.
Moreover, as the Central Bank, we have taken a number of initiatives to promote SME lending. Within the SME credit policy in 2010 for guiding the commercial banks to be involved in SME financing, a number of initiatives have been taken, such as for banks’ to establish “Dedicated Desks” in branches for SMEs and “SME Service Centres”. Bangladesh Bank has fixed the targets for banks SME credit disbursements and an emphasis on providing loan to small entrepreneurs and women entrepreneurs have been communicated.
Banks in Bangladesh are being supported in SME financing initiatives with refinance line from Bangladesh Bank, which has funded by Bangladesh Bank, Government of Bangladesh and development partners like IDA, ADB and JICA.
Under refinance scheme, Bangladesh Bank has provided 23.97 billion taka (as of July 2012) to different banks and NBFIs at subsidized interest rate. 15% of this fund (Taka 4.00 billion) is reserved for women entrepreneurs.
Bangladesh Bank and IFC undertook two key projects for SME sector development. Of these two, the SME Market Segmentation Database is first of its kind in South Asia. Under this initiative, information on SME sector will be generated and will be made available for all stakeholders of SME development.
Bangladesh bank has also issued directives to commercial banks for using the cluster approach for better targeting the SME sector. It is also worthy to mention that Bangladesh Bank is currently working in a research project to find out the impact of the SME financing activities undertaken by the commercial banks in Bangladesh. We are very much committed for developing SMEs in Bangladesh.
However, coordinated efforts are required to overcome SME financing challenges. Banks and NBFIs need to be motivated towards enduring engagement in SME financing. Concerned public authorities, banks, business community and civil society support groups need to engage effectively with the SMEs in understanding their needs and prospects.
Banks and NBFIs would need to have a tailored and explicit strategy for SME banking in place in order to build a solid SME banking strategy to facilitate sound growth and profitability in SME banking, and have a much better credit evaluation mechanism, product design, marketing skills, and knowledge of customer and product profitability.
The further development of financial institutions in light of their SME lending practices must, undoubtedly, be paralleled with further development in human resources. This, in turn, requires plans for training and qualifying trainers to enable financial institutions to undertake their important role in serving the national economy.
Thus, as the financial sector is expected to serve the growing financing needs of the SMEs, the availability of well-trained human resources would undoubtedly become one of the predicaments in successful SME banking operations.
Therefore, the development and organisation of seminars such as this, and various training programmes for the two main training institutions, namely, Bangladesh Bank Training Academy and Bangladesh Institute of Bank Management, through the EU-funded INSPURED project, would be an important step in making sure that adequate trained human resources would be available, as well as an improved awareness is the special need of Bangladeshi financial sector in case of SME financing.
In today’s world, market development is a much more challenging task, which requires coordinated efforts by individual business enterprises and the Government. Bangladesh needs to maximize the benefits derived from the SME sector, as this sector plays a pivotal role in promoting and sustaining the industrial as well as overall economic growth.
The role of SMEs in providing productive employment and earning opportunities has emerged as an important concern among policy makers, and donor agencies. The implementation of the INSPIRED project is directly related to Bangladesh’s priority to foster SME development, and will undoubtedly support the different initiatives taken by the Bangladesh Government to encourage SME growth, which in turn will support the longer term objectives of sustained economic growth and poverty reduction.
Within the above contexts, I would very much like to express my appreciation for the valuable assistance and effort of Bangladesh INSPIRED project component-3, and we are confident that through such technical assistance, we would be able to contribute towards the sustainable and high-quality training in SME banking offered by our two prominent training institutions BBTA and BIBM. We are equally pleased to see the presence of the banking sector participants to utilize such training programs.
Today we have a unique opportunity to be stimulated by some strategic thinking ideas. The INSPIRED project component-3 has put together an exciting seminar designed to bring a fresh perspective on your bank’s strategic processes. I urge you to get the maximum benefit from this seminar. Our foreign banking expert,
Mr. Robert Patterson, brings a wealth of ideas and experience to us here in Dhaka. In conclusion, I can only reiterate my thanks to all those who have contributed to the progress and accomplishment of the project , in particular the management and staff of BBTA and BIBM, the Ministry of Industries for their effortless supervision of the project, and the European Union for its immense support and assistance.
Note: Speech by Bangladesh Bank Governor Dr. Atiur Rahman at launching of SME banking strategy seminar held at Pan Pacific Sonargaon Hotel in Dhaka on April 28.