BSS, Dhaka :
Bangladesh Bank Governor Dr. Atiur Rahman has strongly advocated more lending to small and medium enterprises (SMEs) by commercial banks for promoting inclusive growth.
The governor said the Basel Rules imposing higher capital charges on bank lending to SMEs are viewed as riskier than larger corporates, and to some extent as a disincentive for commercial banks. However, he noted that the substantially higher interest the banks earn on SME loans is well enough to cover the marginally higher capital charge related costs.
Dr Rahman came up with the recommendation and observation while making some points at a session on promoting SME development at a high-profile conference titled ‘Frontier and Developing Asia: Supporting Rapid and Inclusive Growth’, held on Wednesday at the JICA Research Institute in Tokyo, Japan, said a BB press release.
The International Monetary Fund (IMF) and Japan International Cooperation Agency (JICA) jointly organised the seminar, inaugurated by JICA president Akihito Tanaka and IMF Deputy Managing Director Naouki Shinohara.
State minister for Planning and finance MA manna attended the inaugural session. Ganeshan Wignaraja, Director of Research of the Asian Development Bank Institute (ADBI) presented the keynote paper. The conference was also participated by finance ministers and governors of some Asian countries.
JICA President welcomed participants with a plea for Financial and reducing inequality through SME development.
The governor said non-bank alternative options of financing through global and local non-banking financial institutions (NBFIs) and microfinance institutions (MFIs) are already in varying extents of use. Factoring or trading in SME receivables, is also helping SMEs in Bangladesh and elsewhere by providing liquidity against their credit sales to upstream buyers in supply chains, reducing their needs for direct financing.
“All these options are feasible and well worth promoting in the menu of options for fuller catering to SME financing needs, suitably adapted to specific country environments. However, in no way do these alternatives absolve commercial banks from their onus of engagement in socially beneficial SME lending on the plea of marginally higher costs from Basel Rules related capital charges”, Dr Rahman said.
He advised that the culture in mainstream global commercial banking needs a major reorientation towards socially responsible inclusive financing, supporting SMEs and environmentally benign ‘green’ output initiatives.
Sharing Bangladesh experience, the governor said SME financing by banks and NBFIs now comprises nearly a third of total credit, which helped uphold domestic output and domestic demand amid global growth slowdown during and following the global financial crisis.
He said the Department for International Development (DFID) of the United Kingdom would launch a partial credit guarantees for SME lending, which would encourage more SME financing by banks.
Besides banks’ lending to SME, the governor suggested deeper fiscal and monetary policy coordination for desired growth of SMEs, which would eventually promote inclusive growth.
Ganeshan Wignaraja in his keynote paper identified the role the Asian SMEs in output and trade activities, and of the financing and other challenges they face in fuller realization of their potentials.
Bangladesh Bank Governor Dr. Atiur Rahman has strongly advocated more lending to small and medium enterprises (SMEs) by commercial banks for promoting inclusive growth.
The governor said the Basel Rules imposing higher capital charges on bank lending to SMEs are viewed as riskier than larger corporates, and to some extent as a disincentive for commercial banks. However, he noted that the substantially higher interest the banks earn on SME loans is well enough to cover the marginally higher capital charge related costs.
Dr Rahman came up with the recommendation and observation while making some points at a session on promoting SME development at a high-profile conference titled ‘Frontier and Developing Asia: Supporting Rapid and Inclusive Growth’, held on Wednesday at the JICA Research Institute in Tokyo, Japan, said a BB press release.
The International Monetary Fund (IMF) and Japan International Cooperation Agency (JICA) jointly organised the seminar, inaugurated by JICA president Akihito Tanaka and IMF Deputy Managing Director Naouki Shinohara.
State minister for Planning and finance MA manna attended the inaugural session. Ganeshan Wignaraja, Director of Research of the Asian Development Bank Institute (ADBI) presented the keynote paper. The conference was also participated by finance ministers and governors of some Asian countries.
JICA President welcomed participants with a plea for Financial and reducing inequality through SME development.
The governor said non-bank alternative options of financing through global and local non-banking financial institutions (NBFIs) and microfinance institutions (MFIs) are already in varying extents of use. Factoring or trading in SME receivables, is also helping SMEs in Bangladesh and elsewhere by providing liquidity against their credit sales to upstream buyers in supply chains, reducing their needs for direct financing.
“All these options are feasible and well worth promoting in the menu of options for fuller catering to SME financing needs, suitably adapted to specific country environments. However, in no way do these alternatives absolve commercial banks from their onus of engagement in socially beneficial SME lending on the plea of marginally higher costs from Basel Rules related capital charges”, Dr Rahman said.
He advised that the culture in mainstream global commercial banking needs a major reorientation towards socially responsible inclusive financing, supporting SMEs and environmentally benign ‘green’ output initiatives.
Sharing Bangladesh experience, the governor said SME financing by banks and NBFIs now comprises nearly a third of total credit, which helped uphold domestic output and domestic demand amid global growth slowdown during and following the global financial crisis.
He said the Department for International Development (DFID) of the United Kingdom would launch a partial credit guarantees for SME lending, which would encourage more SME financing by banks.
Besides banks’ lending to SME, the governor suggested deeper fiscal and monetary policy coordination for desired growth of SMEs, which would eventually promote inclusive growth.
Ganeshan Wignaraja in his keynote paper identified the role the Asian SMEs in output and trade activities, and of the financing and other challenges they face in fuller realization of their potentials.
