The country’s micro, small and medium entrepreneurs suffer from financing gap worth Tk 23,700 crore that limits the growth of the key economic drivers, according to a study.
World Bank Group and Policy Research Institute jointly conducted the study.
The study report was released at a discussion on ‘financing solution for micro, small and medium enterprises (MSME) in Bangladesh: findings and perspectives’ at the PRI office in Dhaka on Wednesday.
Experts at the discussion said the small entrepreneurs faced discrimination as banks gave priority to large entities when deciding on loans.
WBG senior financing sector specialist Mihasonirina Andrianaivo, in her presentation on the MSME condition in Bangladesh, said that the country’s MSMEs’ access to formal finance was 27.5 per cent whereas large firms enjoyed 44 per cent formal financing scope.
She also mentioned the prevailing business environment in the country as another hurdle for MSMEs.
Andrianaivo also said non-availability of MSMEs’ credit-related data with the central bank’s CIB database was one of the problems the financial institutions faced in issuing credit facility to MSME entrepreneurs.
The report also showed that public commercial, foreign and private banks along with non-bank financial institutions had so far provided Tk 1,52,560 crore in loans to MSMEs.
Private commercial banks disseminated 76 per cent of their outstanding loans to the MSME sector against 19 per cent of the outstanding loans by the public commercial banks.
PRI chairman Zaidi Sattar said, ‘The MSME sector has huge contribution to the country’s economy.’
He also said that the country economy would largely be benefited if the financing gap could be removed.
Bangladesh Bank deputy governor SM Moniruzzaman said that the financing gap for MSMEs mentioned in the report might be lower than the estimation as disbursement of SME loans by banks were above the target.
Mentioning insufficient or lack of collateral of MSMEs as a major issue in providing loan facility to the small and medium entrepreneurs, he said that the central bank was working on the issue.
Finance ministry senior secretary Ashadul islam said that people first went to the microcredit entities rather than taking money from banks as they found taking credit facility from banks difficult.
Small entrepreneurs find the formal credit facility of the banks non-cooperative, while banks find it risky to believe the small borrowers who do not have proven track records.
To facilitate financing for MSMEs, policies must be formulated based on the country’s ground reality instead of copying other countries’ designs, said BRAC Bank SME head Syed Abdul Momen.
IDLC Finance chief executive officer and managing director Arif Khan said that checking credit track-record of a customer did not give them (financiers) details of the client rather it gave a fraction of credit information, which was a major problem in issuing credit to the micro and small entrepreneurs.
He emphasised resolving and enforcing contracts issue for the recovery of loans, he said.
Arif also mentioned that IDLC Finance’s profit margin against loans increased due to dissemination of loans to SMEs and high recovery rate from the entities.
Prime Bank managing director and chief executive officer Rahel Ahmed admitted that banks in most cases gave priority to large entities over small businesses when deciding on loans.
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