BANGLADESH Bank (BB) officials made the disclosure that scheduled banks and non-bank financial institutions have failed to fulfill their SME loan disbursement targets in the first quarter of this year. Making the disclosure they also voiced apprehension that failing to achieve the target may ends up in a failure to achieve the growth targets of the economy at the year-end. BB officials have cited the reason behind the failure as being the business uncertainties in the country which have hindered many banks and investors from investments due to the uncertain nature of the country’s politics. There is a common perception that the business community is working on a cautionary approach due to the political unrest but it may now have an adverse impact on SME loan disbursements and the achievement of the growth target itself which was estimated to come from the expansion of small and medium industries.
BB data show that banks and the NBFIs disbursed 23.77 percent of SME loans during the three months out of an annual target of Tk 88,537.24 crore. It should not have been below 25 percent to stay the course. Moreover the NBFIs were supposed to have disbursed at least 25 percent but they also failed.
Loan disbursement figures suggest that four state-owned banks – Sonali, Janata, Agrani and Rupali – have disbursed Tk 1,509.64 crore or 27.33 per cent SME loans in the first three months of 2014 but the private commercial banks fell short of their targets.
In the private sector, SMEs are treated as the blood flow of the economy that boosts investment and it is especially important now at a time when the GDP is expected to move to a new height to achieve the middle income status. The small and apparently innocuous incidences like this one are the loopholes that may sum up at the end of the fiscal year to emerge as a big black-hole to keep the economy away from the projected growth path.
We hold the view that investment in the economy must be steady – be it in agriculture, SMEs or in the formal manufacturing sectors like textile and garments, ship building or the electronic industry. Banks must make regular investments to good clients while screening out faulty investors who willingly become defaulters to push banks to go for greater provisioning of interest to overcome bad loans. We hold the view that banks must go for quality investment which in turn will allow reducing the rate of interest to make business more competitive. This is one way of making SMEs more sustainable and this in turn may make investment to SMEs more attractive. We know that a stable political environment is supportive to end all business uncertainties and while banks are expected to make loans steady to the SMEs, we know it is the responsibility of the political leadership to keep the political environment business friendly and we ask them to make sure of it in the greater interest of the nation.
