NEWS report said classified SME loans at banks and non-bank financial institutions have increased by 18.27 percent in 2014 compared with 2013 when 62.20 percent of the loans went to trade and such other easy unproductive sectors neglecting funding of projects in the manufacturing sector. Apparently, the primary goals of financing small and medium enterprises could not be achieved because most money went to business projects instead of investment in manufacturing. The problem arises from banks and NBFIs neck to funding projects in the trading sector which earns quick profits and also quickly recoverable. But as it appears manufacturing creates more jobs and produce merchandise but it remained sidetracked. According to figure released by Bangladesh Bank, banks and NBFIs disbursed a total of Tk 1,00,910.15 crore in SME loans were disbursed in 2014 while the figure was 15 percent less in the previous year. But in this time loans from banks and NBFIs increased by 10.69 percent to Tk 62,767.18 crore to the trading sector which was bigger than the previous year. The trading sector had got 66.65 percent of the total SME loans while the manufacturing sector got only 29.97 per cent of the disbursement in 2014.
It appears that banks and non-bank financial institutions are systematically neglecting the manufacturing sector because the trading sector carries less risk but in doing so they are apparently defeating the priority of the SME loans to boost the manufacturing and job creation. Keeping aside the easy loan recovery in trading, the manufacturing sector really holds more merit due to the chance of developing more productivity related activities. We believe banks and non-banks financial institutions should stick to the very priority of SME funding and take care so that more fund are channelised to manufacturing in order to encourage local and international investment in this sector. We already know that higher loan disbursement in the trading sector does not really have a large beneficial impact on the economy. It is rather wasteful to keep funding trading projects targeting benefits in the short term.
We know it is time to push industrial development in diverse manufacturing at localized level. Manufacturing plays the biggest role to GDP growth and bringing socio-economic progress in people at low-income level. We urge banks and non-bank financial institutions to take into account the real development strategy of the SME loans and made sanction and disbursement accordingly.
