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Advancing Financial Access for SMEs

Presented by:

Munawar Reza KhanDeputy Executive Director

TMSS, Bangladesh

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Booster Sectors in BangladeshThe Ministry of Industries, Government of Bangladesh has identified thefollowing booster sectors:

Electronics and electrical

Software-development

Light engineering and metal-working

Agro-processing/agro-business/plantation agriculture/ specialistfarming/tissue-culture

Leather-making and leather goods

Knitwear and ready-made garments

Plastics and other synthetics

Healthcare & diagnostics

Educational services

Pharmaceuticals/cosmetics/toiletries

Fashion-rich personal effects, wear and consumption goods.

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Importance & Role in Economy

Considering presences of SMEs in Bangladesheconomy, it is found that almost 90 per cent ofthe private enterprises are SMEs and about 70 -80 per cent of non-agricultural workforce areworking there. The SMEs contribute up to 25per cent of GDP including about 40 per cent ofgross manufacturing output and around 25 percent of the total labor force.

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Importance & Role in EconomyAbout 6.8 million SMEs are activelyperforming in Bangladesh which areemploying about 37 million people andproviding 77 per cent of household income.Various categories of SMEs togethercontribute between 80 to 87 per cent ofindustrial employment and 29 percent oftotal employment in Bangladesh.

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Financial Institutions

Banks

NBFIs / Leasing Company

Micro Finance Institutions (MFIs)

Different Govt. Organizations

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SME Loan Disbursement Trend in Bangladesh

Banks Contribution = 74.23 %NBFIs Contribution = 19.74%MFIs Contribution = 2.34%Different Govt. Organizations = 3.69%

2013 =USD 10665 Mil

2014 = USD 12614 Mil

2015 = USD 14484 Mil

Manufacturing = 28 %

Trading = 64%

Service = 8%

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Major Constrains in SME Advancementin Bangladesh

Banks Lack of Investment Finance & Working Capital

Finance

Short falls of Enabling Environment for Trade & Business

Non-Tariff Barriers (NTB) and Changes in World Trade

Regimes

Barriers in Access to Finance for Women Entrepreneurs.

Inability to Market SME Product

Inability to Maintain Product Quality

Lack of Skilled Technicians and Workers

Poor Management Skills of Entrepreneurs

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Important Complicated Issues Of SME Loan Disbursement

1) Delay In Repayment Of Loan

2) Trustworthiness Of Loan Borrower

3) Failure To Submit Proper Business Plan

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Important Complicated Issues of SME Loan Disbursement

Failure to Submit Inadequate Financial Projection

Lack of Entrepreneurial

Knowledge

Lack of Govt. Support

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Important Complicated Issues of SME Loan Disbursement

Lack of Available Fund

High Rate of Interest

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Challenges for SMEs

Lack of financial literacy

Lack of easy access of bank loan

Poor information about market opportunities and requirements

Fierce competition from low cost imported products

Lack of adequate investment funds

Banks main focus on corporate business rather than SMEs

Lack of collateral and high rate of interest for bank loans

Lack of modern technology

Lack of advisory and technical services

Lack of skilled technicians and workers

Lack of research and development activities

Poor physical infrastructure and high transportation cost

Lack of credit guarantee scheme

Lack of mentoring

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Impact of SME Growth in Bangladesh

Employment Generation (Both Self & Wage)

Reducing economic disparities between urban and rural areas

Creating opportunities for value adding processing activitiesand generated sustainable livelihood

Women Empowerment

Enhanced Living Standard

Creation of Market for Indigenous Group

Visible Contribution to GDP and Poverty Reduction

Growth in International Business

Reduction in Urban Migration

Creation of Entrepreneurship

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RecommendationsEnhancing Access to SME

Finance

Development of SME Infrastructure

Provide Consultancy Service

Quality Control of SME Products

Reduction Of Interest Rate

Increase Fund For SME

Training Facilities for SME Workers & Entrepreneurship

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RecommendationsOrganizing Trade Fairs,

Symposiums, Workshopson SME on Regular Basis

Introducing FriendlyFinancing Polies.

Settings Help Desks in theFinancing Sectors andBusiness PromotionBodies With InternetFacilities.

Provide BusinessDevelopment Services bythe Financing Bodies.

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RecommendationsExploring Market

Opportunities on a SustainedBasis and Mobilizing theRequired Support Services ofSmall & Medium Industriesby the Direct SupportServices of the Govt.

Creating an EnablingEnvironment for AttractingPrivate Investment.

Introducing a Differentiatedand Hassel-free Indirect TaxSystem for SMEs

Increase Govt. Support

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RecommendationsConduct a Census of SMEs

Containing DetailedInformation on Inputs,Outputs, Technology andManagement. (To beupdated periodically)

Issue Identification CardsWith Registration Numberto SMEs.

Create a Database of SMEsand Update it Periodically.

Create a Detailed UpazillaLevel Map of SMEs toIdentify Cluster.