SMEs need boost from formal banking channels, say speakers

11 Feb 2020 11:20 PM
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Speakers at a seminar here have said an incredible number of small and medium enterprises (SMEs), cottage and micro sector businesses which have remained out of formal banking channel need a big push with proper backing from larger finance institutions.

They said introduction of smart cards like bank debit cards with financial facilities could possibly be an option to get started with.

The seminar titled ‘Uttaron-In Promoting Sustainable & Inclusive Finance for SME & Farmer and Discussion on SME Card’ was held on Sunday in the office of the United Nations Industrial Development Organisation (UNIDO).

Experts from the Bangladesh Bank, US, BRAC, European Union-funded projects, NRB Bank, Uttaran and Aurora attended the programme with their views on financial inclusion of the SMEs. TM Tajul Islam, a former consultant of the World Bank, moderated the seminar.

Speaking as the chief guest, Khondkar Morshed Millat, General Manager of the Sustainable Finance Department of the Bangladesh Bank, said the central bank includes a favourable policy to bring the SMEs and cottage and micro industries under a greater financial inclusion scheme.

He said because the SMEs and small industries are playing a essential role any effort to bring them under an integrated approach are certain to get support from the central bank that regulates the banking sector. “But things have to be set up beneath the existing policy and in conformity with banking rules and regulations.”

Millat said they will be ready to discuss possibilities to increase their support to the ambition of bringing the vital cottage and micro businesses under a greater financial regime.

The specialists said currently only 35 percent of the country’s 7 million SMEs can avail of formal banking facilities and the others remains untapped despite huge potentials of the sector. The country’s burgeoning cottage and micro industries terribly lag behind regarding financial inclusion by the formal banking channels.

TIM Zahid Hossain, Advocacy Advisor of the Ultra-poor Graduation Programme of BRAC, in his keynote speech said their experience in providing support to the country’s poorest section of folks includes a tremendous positive impact.

He said people who are participating with the SMEs or cottage industries could possibly be helped by linking them with the formal banking channels.

Now Zahid said the smaller businesses mostly take money from NGOs and individual creditors, but if they are connected with the formal financing institutions like banks and other non-banking finance institutions their contributions to the economy would be greater.

“With skill development training on basic accounting, risk management and cushioning the SMEs would be better equipped to settle their loans. Thus the commercial banks could make more profit,” he observed.

The speakers agreed that the introduction of smart cards that might be employed by the SME owners and even by farmers could bring a revolutionary impact.

Zaki Uz Zaman, UNIDO Country Representative in Bangladesh, said Aurora and Uttaran is actually a good platform because they have the knowledge of handling grassroots persons involved with the SMEs, especially in northern Bangladesh, in piloting a project for financial inclusion of smaller businesses. “Both Aurora and Uttaran work with grassroots businesses.”

Ashraful Alam, Country Project Coordinator of the UNCDF, said banks should come forward with specific product ideas that could benefit the SMEs and other smaller businesses.

He said the utilization of technology would increase the business efficiency of the SMEs enabling them to take challenges.

NRB Bank’s Deputy Managing Director Khurshed Alam said these were prepared to roll out new loan products for the SMEs, cottage and micro businesses, however the low interest rates is actually a major challenge.

He said if indeed they get policy support from the federal government his bank can take more pro-active approach in assisting the SME sector.

Ali Sabet, Team Leader of the EU GoB-funded Prism Bangladesh project, was optimistic in devising a way for the SMEs in order that they come under an inclusive financial regime.

NRB Bank’s Head of SME ATM Zamal Uddin, BSAFE Foundation’s Quamruzzaman, Associated Press Bureau Chief Julhas Alam, company law expert Barrister M Moksadul Islam, among others, attended the seminar.