Economic Reporter :
Long-term finance for the SME entrepreneurs is essential for promoting the sector as well as boosting country’s economy. Long-term finance is needed for the further development of the SME sector, said experts.
Access to finance is one of the major hindrances for expanding the business of the SME entrepreneurs. As per the instruction of the central bank, commercials banks are now providing SME loan among the entrepreneurs across the country. Most of the commercial bank’s SME loan tenor is between three to five years. Currently, the SME entrepreneurs including the women entrepreneurs are availing SME loans at the rate of 10- 13 per cent.
Country’s SME sector is failing to flourish due to short-term finance and high rate of interest, claimed a good number of SME entrepreneur.
A senior Bangladesh Bank official told The New Nation on Sunday that the central bank recently signed agreements with a good number of commercial banks to disburse long-term loans for the SME entrepreneurs. “Such kind of initiative will help the SME entrepreneurs to run their business smoothly”, said the official.
Considering the necessity of long- term financial facilities for the SME entrepreneurs, the Asian Development Bank (ADB) will provide $200 million loans.
The credit facility will target in particular firms run by women, who are mostly engaged in subsistence trade and retail activities, and are typically less educated and have less access to SME finance than men, said a ADB media release.
‘Rural firms and firms run by women struggle to get loans from banks. That means both they and the Bangladesh economy lose out,’ said Peter Marro, Principal Financial Sector Specialist, in ADB’s South Asia Regional Department. ‘We want to help cottage industries and SMEs expand and flourish, including those operated by women.’
Loans will be targeted at small firms outside of the metropolitan areas of Dhaka and Chittagong, with at least 15 per cent allocated for women entrepreneurs.
There are about 7.2 million SMEs in Bangladesh. They account for 90 per cent of all companies and employ 70-80 per cent of the non-agricultural workforce in Bangladesh. In 2014, SMEs contributed 25 per cent of Bangladesh’s gross domestic product and 40 per cent of the manufacturing output.
However, SME growth is constrained by the inadequate access to finance and electricity, poor transportation, increasing labor costs, and lack of skilled manufacturing labour specially in rural areas.
The project also includes $2 million in technical assistance from the Japan Fund for Poverty Reduction to help establish incubation facilities at educational institutions to promote entrepreneurship, and support entrepreneurs’ development units at Bangladesh Bank.
It will also set up dedicated women’s desks in financial institutions, and strengthen the capacities of women entrepreneurs in accessing available credit facility through financial and legal literacy as well as in managing their enterprises.
This assistance will help in the development of SME clusters to boost their capacity to access bank financing and strengthen the backward and forward links of SMEs to the formal sector, particularly the larger export-driven industries.
Long-term finance for the SME entrepreneurs is essential for promoting the sector as well as boosting country’s economy. Long-term finance is needed for the further development of the SME sector, said experts.
Access to finance is one of the major hindrances for expanding the business of the SME entrepreneurs. As per the instruction of the central bank, commercials banks are now providing SME loan among the entrepreneurs across the country. Most of the commercial bank’s SME loan tenor is between three to five years. Currently, the SME entrepreneurs including the women entrepreneurs are availing SME loans at the rate of 10- 13 per cent.
Country’s SME sector is failing to flourish due to short-term finance and high rate of interest, claimed a good number of SME entrepreneur.
A senior Bangladesh Bank official told The New Nation on Sunday that the central bank recently signed agreements with a good number of commercial banks to disburse long-term loans for the SME entrepreneurs. “Such kind of initiative will help the SME entrepreneurs to run their business smoothly”, said the official.
Considering the necessity of long- term financial facilities for the SME entrepreneurs, the Asian Development Bank (ADB) will provide $200 million loans.
The credit facility will target in particular firms run by women, who are mostly engaged in subsistence trade and retail activities, and are typically less educated and have less access to SME finance than men, said a ADB media release.
‘Rural firms and firms run by women struggle to get loans from banks. That means both they and the Bangladesh economy lose out,’ said Peter Marro, Principal Financial Sector Specialist, in ADB’s South Asia Regional Department. ‘We want to help cottage industries and SMEs expand and flourish, including those operated by women.’
Loans will be targeted at small firms outside of the metropolitan areas of Dhaka and Chittagong, with at least 15 per cent allocated for women entrepreneurs.
There are about 7.2 million SMEs in Bangladesh. They account for 90 per cent of all companies and employ 70-80 per cent of the non-agricultural workforce in Bangladesh. In 2014, SMEs contributed 25 per cent of Bangladesh’s gross domestic product and 40 per cent of the manufacturing output.
However, SME growth is constrained by the inadequate access to finance and electricity, poor transportation, increasing labor costs, and lack of skilled manufacturing labour specially in rural areas.
The project also includes $2 million in technical assistance from the Japan Fund for Poverty Reduction to help establish incubation facilities at educational institutions to promote entrepreneurship, and support entrepreneurs’ development units at Bangladesh Bank.
It will also set up dedicated women’s desks in financial institutions, and strengthen the capacities of women entrepreneurs in accessing available credit facility through financial and legal literacy as well as in managing their enterprises.
This assistance will help in the development of SME clusters to boost their capacity to access bank financing and strengthen the backward and forward links of SMEs to the formal sector, particularly the larger export-driven industries.
