P a g e | 11.INTRODUCTIONThe perception of the report is SME financing, SME applicable sectors in Bangladesh. Access tocredit is now considered as „human right‟ not „gift‟ or „sympathy‟ of an individual or aninstitution. Recently there has been a phenomenal growth in activities of microcredit in manyCountries, especially in the developing countries in the world. The first Microcredit SummitMeeting held in Washington,DC, USA in 1997 has added a momentum in a global movement toreach 100 million of the worlds poorest families, especially the women of those families, withcredit for self-employment and other financial and business services by the year 2005.Consequently, the UN has declared2005 as the “International Year of Microcredit.” The Year ofMicrocredit calls for building inclusive financial sectors and strengthening the powerful, butoften untapped, entrepreneurial spirit existing in communities around the world (InternationalYear of Microcredit, 2005).While the resurgence of the small and medium enterprises (SMEs)began in the early 1970s, the trend continued well in the 1990s and has been maintained eversince. The recent global outburst of interest in SMEs has brought the issue on to the center-stageof academic discourse as well as of governmental policy making process, especially backed byproactive donor support. The roll of small and medium enterprise (SMEs) is indispensible foroverall economic development of a developing countries like Bangladesh. Since this is labor isintensive with short gestation period, it is capable of increasing national income as well as rapidemployment generation; achieving millennium development goals (MDGs) especiallyeradication of extreme poverty and hunger, gender equality and women empowerment. SMEsector has played a vital role in economic development of some prosperous countries of Asia.Our neighboring countries have also given due importance on SME. Terming SME as‟employment generating machine‟ they stressed on SME development for higher economicgrowth, narrowing the gap of income inequality and poverty alleviation. The present governmenthas also put much emphasis on the development of SME sector considering it as „the drivingforce for industrialization‟.
P a g e | 22. Definitions Small and Medium Enterprises (SMEs)Small Enterprise refers to the firm/business which is not a public limited company and compliesthe followings criteria:Medium Enterprise refers to the establishment/firm which is not a public limited company andcomplies the following criteria:
P a g e | 33.SME Financing In BangladeshThis is the right time to focus on the experiences of Bangladesh, the birthplace and the countrywith the biggest and most vibrant microfinance sector. This is because the microcredit movementis in mature stage in our country, and we have a clearer picture of its strengths as well aslimitations. Necessarily, to move forward for a sustainable achievement, we need to be moreeffective, and increase outreach, design products to include the poorest, and also provide financefor growth and employment oriented SMEs which are needed to spread the poverty alleviationnet wider, so that significant decline in poverty takes place. This paper is an updated extension ofan earlier paper titled “the Denationalized Commercial Banks‟ Contribution in Developing Smalland Cottage Industries (SCIs) in Bangladesh” and summarizes the SME financing experiences ofthe country over the years, and the contribution of different commercial and specialized banks indeveloping this sector. For this purpose financial contribution of different types of bank from1991 to 2005 (June) has been reviewed. Moreover, it tries to emphasize on the importance ofdeveloping SMEs in the country as well as the obstacles the entrepreneurs are facing in shapingtheir ventures mainly in accessing the institutional credit facilities.3.1 Steps taken by Bangladesh Bank for SME Development:Bangladesh Bank has already introduced several schemes and programmes to flourish andexpand SME Enterprises. Refinance scheme funded by Bangladesh bank, IDA, ADB has beenfacilated for the development of SME Sector. Besides, to ensure institutional financial facilitiesunder easy conditions Bangladesh Bank has taken diverse steps: like opening of „DedicatedDesk‟ for SME and „SME Service Centre‟ in the banks and special facilities for the womenentrepreneurs. But reality is that expected outcome has not been achieved so far in this sector.In the back drop of recent global recession and changed circumstances, it has become essential toinclude all segments of people in the growth process through facilitating credit to the sectorswhere less attention has been given due to present market mechanism, specially, in agricultureand SME sector. Reasonably, a new department namely‟SME and Special ProgrammesDepartment‟ has been established in Bangladesh Bank recently will be solely responsible forpolicy formulation, facilitating fund, monitoring and development of entrepreneurship in theSME sector.The guidelines formulated by the newly created department for compliance of the banks andfinancial institutions for the development of SME sector are enumerated below:
P a g e | 4For the first time in Bangladesh, an indicative target for SME loan disbursement has beensetfor 2010 by the banks and financial institutions considering SME development as one of themost important development agenda of the country. According to the target, SME loan shall bedisbursed to the small, medium and women entrepreneurs.Following the Area Approach Method banks/financial institutions will try to attain theirindicative targets separately by dividing it as branch wise, region wise & sector wise.Each bank/financial institution shall follow a separate business strategy in financing SMEloanwith least formalities in executing documentation to ensure easy and speedy loan sanction anddisbursement process.Priority shall be given to small entrepreneurs. For small entrepreneurs credit limit will beranged from Tk. 50,000 (Fifty thousand) to Tk.50,00,000 (Fifty lac).For more participation of women entrepreneurs in industrial development of the countryandfor conducting business activities by women entrepreneurs in large number, priority shall haveto be given to potential women entrepreneurs in respect of SME credit disbursement.Banks & Financial Institutions shall put highest priority in receiving loan applicationfrom smalland medium women entrepreneurs and settle the loan disbursement process within veryreasonable time from the date of acceptance of the application.Each bank and financial institution shall establish a separate ‘Women Entrepreneurs’Dedicated Desk’ with necessary and suitable manpower, provide them training on SMEfinancing and suitably appoint a lady officer as chief of dedicated desk. Branch wise list of‘ Women Entrepreneurs’ Dedicated Desk „ should be sent to SME and Special ProgrammesDepartment of Bangladesh Bank within two months from the date of declaration of thispolicyand programme.Banks and financial institutions may sanction up to Tk. 25,00,000 to womenentrepreneursagainst personal guarantee. In that case, group security/social security may be considered.The success in SME loan disbursement will be considered as yardstick for furtherapproval ofnew branches of the concerned bank. License for New Branches will be issued for financing thepriority sectors like SME and agriculture from 2010 in the name of ‘SME/Agriculture Branch’instead of ‘SME Service Centre; in order to involve banks in financing priority sector likeSME and Agriculture’.
P a g e | 5Each bank/financial institution shall fix the interest rate on SME loan sector/subsectorwise.However, bank/financial institution will inform Bangladesh Bank sector/sub-sector wise rateof interest immediately and ensure disbursement of refinanced fund to the clients (womenentrepreneurs) at Bank rate +5% interest.3.2 Special arrangement for Women Entrepreneurs:About half of the population of Bangladesh is women. Therefore, women participation in themainstream of economy is crucial for attaining sustainable economic growth & povertyreduction. But women participation in institutional economic sector is inadequate & the rate ofwomen entrepreneurs is very low compared to that of male counterparts. In fact, there exist manyobstacles in women participation in the mainstream of economy although the degree of integrity,devotion, creativity and expertise of women society make us surprised. Especially womenparticipation in micro credit programmes and readymade garments industry is contributingsignificantly to the country‟s industrialization. Similarly, participation of women entrepreneursin SME sector is vital forth flourishing of Bangladesh economy. Meantime, Bangladesh Bankhas taken some steps and formulated a guideline for the banks & financial institutions to ensuremore institutional financial facilities for women entrepreneurs in SME sector.a. With a view to organizing and making uniform industrial development and to ensureinstitutionalcredit facilities, at least 15% of total BB refinance fund for SME sector has been allocated forwomen entrepreneurs.b. Interest rate for women entrepreneurs will be Bank rate (which is at present 5%) plusmaximum5%; i.e. not more than 10% per annum.c. Banks/Financial Institutions will accept and settle all types of loan applications of SMEwomenentrepreneurs with the highest priority.d. Banks and financial institutions shall take initiative to advertise all the facilities for womenentrepreneurs in both electronic & print media.e. Banks and Financial Institutions may provide a maximum loan facility of Tk.25, 00,000/-againstpersonal guarantee if borrower is woman or majority of the owners of the enterprise arewomen.f. Banks/Financial Institutions shall establish special advice and service centre for womenentrepreneurs in selected branches and ensure service friendly approach towards womenentrepreneurs.
P a g e | 63.3 Grace Period:The entrepreneurs often raise complaints regarding short duration of grace period for repaymentof ME loan. Therefore, banks and financial institutions will consider the reasonablegrace/moratorium period at the time of formulating credit policy for SME sector.3.4 Eligibility of the Borrower:Real entrepreneurs who are directly involved in SME sector will be considered eligible for SMEcredit. Generally loan defaulters will not be entitled to get new loan.3.5 Interest Rate on SME Credit:Banks/financial institutions shall fix up the interest rate on small and medium loan for therespective sector/sub-sector. The operating cost of the banks is high for the small entrepreneurs.Reasonably, threat of interest in this sector is somewhat higher. Banks are being given directionsto keep the interest rate within a tolerable limit. Bangladesh Bank is providing refinance facilityto banks and financial institutions at bank rate (at present 5%) in SME sector. The fund obtainedat bank rate through BB refinance window should be disbursed at bank rate + not more than 5%interest to the client level (in case of women entrepreneurs).3.6 Target of SME Credit DisbursementSerial No. Banks & Financial Institutions Target(Tk.in core)1 State-owned Commercial Banks 3,8972 Specialized Banks 6003 Private Commercial Banks 17,4784 Foreign Commercial Banks 7075 Non-Bank Financial Institutions 1,313Grand Total: 23,995
P a g e | 73.7 Bank-wise SME Service CentreSerialNo. Name of the BankExisting SME centreTotal2008 20091 IFIC Bank Ltd. 2 3 52 Islami Bank Bangladesh Ltd. 10 10 203 National Bank Ltd - 10 104 The City Bank Ltd 5 5 105 NCC Bank Ltd 4 4 86 Prime Bank Ltd - 5 57 South East Bank Ltd - 10 108 Dhaka Bank Ltd. 3 2 59 Social Islami Bank Ltd 5 5 1010 Dutch Bangla Bank Ltd 5 5 1011 Standard Bank Ltd 3 3 612 Mercantile Bank Ltd 3 - 313 The premier Bank Ltd - 5 514 Trust Bank Ltd - 5 515 Brac Bank Ltd 30 30 6016 Mutual Trust Bank Ltd 5 5 1017 Bank Asia Ltd - 10 1018 Shahjalal Islami Bank Ltd 2 5 719 Jamuna Bank Ltd - 5 520 Commercial Bank of Ceylon 2 4 6Grand Total: 79 131 210
P a g e | 93.9Recent Activities of SME & Special Programmes of GOVT.SME Entrepreneurs-Banker match making eventMeeting on Agroprocessing Industries in rural areasMeeting with Bangladesh plastic Goods Manufacturers AssociationMeeting with BIBM for carrying out a joint research program on Impact of SME financingSteps taken for expediting the activities of Refinance Scheme for Agrobased ProductProcessing Industries in Rural AreasOpen SME credit disbursement in BograWomen entrepreneur gathering and product displayHilltracts enterprenure fair held at Rangamati in co-operation with Bangladesh BankRoundtable on e-Commerce and Online business opportunities for SME entrepreneursSME Loan Disbursement to Rural Area (January-September, 2012)Women Entrepreneneurs fair Deshojo Ponno Mela inauguratedBanker-Entrepreneurs meeting SherpurSME Program in Dikpaits and JamalpurDiscussion with the Representatives of Banks/NBFIs Regarding SMEJICA, IFC and Bangladesh Bank join hands to promote medium to long-term financingamong the entrepreneursMeeting with BUILDMeeting with Bankers and Entrepreneurs in SirajgonjMeeting with DFID Consultants on Credit Guarantee Scheme for Micro, Small andCottage Enterprise (MSCE) under DFID assisted Financial Inclusion Project, Bangladesh(FIPB)Capacity Building Training Program for Participating Financial Institutions (PFIs) underJICA assisted FSPDSME ProjectMeeting with the representatives of Banks/NBFIs (PFIs)Initiative for development of shoe cluster at BhairabFarmers & agro-based industry entrepreneures gathering at NarshindiExchange of views program for women entrepreneures at MymenshingBangladesh Bank and Mutual Trust Bank Officials visit Prothibondhi Community Centreat MymensinghResearch Workshop on "An Evaluation of SME Refinancing Programs by BangladeshBank"Exchange of Views with SME Bank-Enterprenure in SatkhiraVisiting cluster at SatkhiraMeeting with First Secretary (Eco & Projects), High Commission of IndiaCapacity Building Training Program for Bank and NBFI Officials under JICA assistedFSPDSME ProjectExchange of Views Programmes with Women Entrepreneurs in SylhetInitiatives for Farmers, Agrobased Industries & Women Entrepreneurs.Meeting with Bankers for Developing Jamdani ClusterMeeting with Executive Vice President, Asian Institute of Development Studies,PhilippinesPreparatory Meeting: Training to the PFIs Regarding JICA funded FSPDSME ProjectGreetings & best wishes for the Development of Women Entrepreneurs
P a g e | 10Cluster Development Initiative on Jamdani handicraftMeeting with Women Entrepreneur manufacturing rice bran oilMeeting with Women Entrepreneur Association of Bangladesh (WEAB)"SME Credit Risk Management" Training ProgramBanker-Entrepreneurs gathering and Cluster development Program Small GarmentsIndustry Cluster at Jinjira, KeranigonjWorkshop on SME Financing for software and IT services sector-Problems and ProspectsMeeting with Airtel for SME PromotionInitiatives for Helping Working Handicapped WomenMeeting with Airtel for SME Promotion on October 08, 2012Information Dissemination Session about JICA funded FSPDSME conducted by SMEFoundationWorkshop on Women entrepreneurs: Problems & ProspectsWorkshop for skill development of women entrepreneursSME & Special Programmes Department of BB extended hand of cooperation towardswomen EntrepreneursMeeting with DFID Representatives for SME DevelopmentMeeting with PFIs for financing to SMEs under JICA finance FSPDSME projectViews Sharing Meeting organized by BWCCIMeeting with BASISExposure Visit of GM of SMESPD to India on SME Knowledge SharingMeeting with the delegation of Frankfurt School of Finance & ManagementSME Performance for January-June, 2012 period - At a glanceSME Enterprenure Meeting at JessoreGM visit Keshabpur wood made show-peice industry clusterSummarized Statement of Industrial Credit, June 2012Meeting with IFC and Windmill CorporationMeeting with the Executives of Bangladesh Mudran Shilpa SamityMeeting with Grameen Phone for SME PromotionMeeting with ROBI for SME PromotionSpecial SME InitiativeDG-1 visited Chittagong for expediting SME credit ProgramSME Performance: January-June 2012SME initiatives by SME & SPD, Month : June 2012SME initiatives by SME & SPD, Month : May 2012
P a g e | 114. Potential SME SECTOR: Bangladesh has a lot of potential sectors for applyingSME. These sectors are mentioned belowSerialNo.Name of Sectors SerialNo.Name of Sectors1 Agro based and agro processingindustry33 Telecommunication2 Agro tools making and marketting 34 Old iron goods3 Fishing boat building 35 Mobile set and acccesories4 Nakhshi kanta and handloom 36 Electronic business5 Food seed preservation 37 Fertilizer tools6 Bakery 38 Jute trading7 Hatchery 39 Clothing and shoe business8 Dry fish processing 40 Rod and cement business9 IT- based activities 41 Hardware business10 Computer softoware and ICT goods 42 Crockery business11 Cyber café 43 Grocery and chaff goods12 Forestry and furniture 44 LP gas business13 Horticulture, floriculture 45 Warehouse and contiasner business14 Cold storage 46 Printing and packaging15 47 Plastic industry16 Hospital and clinic 48 Cosmetic industry17 Handicrafts 49 Railway slipper manufacturing18 Herbal medicine industry 50 Production of lime from oyster19 Jute goods and jute mixed goods 51 Manufacturing of cement pillar20 Stationery goods industry 52 Catechu production21 Transport communication 53 Oil and pulse mill22 Laboratory 54 Mini sugar mill23 Jewellery 55 GI pipe producing industry24 Ginning ang baling 56 Hosiery25 Tailoring 57 Welding industry26 Saloon and beauty parlour 58 Bronze and brass industry27 Community centre 59 Partex industry28 Diagonstic centre 60 Biogas plant29 Call cebtre 61 Wood and steel goods business30 Digital colour lab 62 Paddy rice business31 Cable operators 63 Boutiques32 Generator 64 Small amusement park
P a g e | 125. SMEs Industry Produced Product At A Glance:HANDICRAFT
P a g e | 13ENVIRONMENT FRIENDLY PAPER GLASSPOTTERY
P a g e | 16LEATHER SHOES6. Industrially undeveloped area:Division DistrictDhaka Narshingdi, Naryanganj, Manikhanj, Munshiganj,Gajipur, Jamalpur,Tangail,Kishorganj, Netrokona,B.Baria, DhakaRongpur Ponchogor,Thakurga,Dinajpur,Nilfamari,Lalmonirhat.Kurigram,GaibandhaKhulna Chuadanga,Meherpur,Kustia,Jhinaidoho,Magura,Norail,Joshor,Satkhira,BagerhatBorisal Jhalkathi, Pirojpur, Potuakhali, Borguna, VolaSyhlet Sunamganj, Moulovibazr, HobiganjChittagong Khagrachori, Rangamati. BandorbonRajshahi Joypurhat, Nowga, Chapainobabganj, Natore, Sirajganj, Pabna
P a g e | 177.Some Successful SME business in Bangladesh:LEATHER INDUSTRY:Al-Amin leather crafts(leather & jute handicrafts)Vegas shoe international(hand made shoe)bsuticLeather cave(sandels,parts,ladies and jeans shoe)ABC footwear industries ltd.(footwear)Rahman leather goods(belts,moneybag, card holder)BUTICS:Hoimokanti fashion kutirltd(coat,cussoncover,shoppingbag,dress)Karukag productRongmelabuticks(noksikatha,block printed dresses)JUTE INDUSTRY:Golden fiber and yarnIntred ltdHANDICRAFTS:Time expoSokhcraft(various accessories)Ion craft(jute product)Allimpon craftSoilpikcrafts(showpieces)Jackfruit toys(bag)Bimurto(hand made paper product)PNP corporation(garments, leather goods)Pierlessenterprise(home decorative items)Delta pets(handmade pet home)
P a g e | 18Eco technologies(paper cup)FOODS INDUSTRIES:Kamrul agro food industries(beverages)BTEM foods(spices)Fame enterprise(honey, mushrooms)Admed food products(jeam,jelly,cornflower,casterd powder)Nothbengol food village(frozen foods)Moucashikollansomiti(honey)Harbs world ltd.(mushrooms)HIGH-TECH INDUSTRY:Valucity data technologies(business vip& web development)The computers ltd.(business software)Best business bond ltd.(TROYE software)PLASTIC INDUSTRIES:Sathi plasticENGINEERING INDUSTRIES:Nouga engineering shop(bakery machine)Fatemaengineering( pharmaceutical machines)Prime corporation(water heater and purifiner)Al fatahelectronics(IPS,UPS,solarinverter,LED display)Nobotiindustries(agro machines)HEALTH & PHERMACY:Medicare international(medicareequipments)Aiurbadi pharmacy ltd.(medicine)
P a g e | 198.SUMMARY: This report wrestles with how SME in Bangladesh is being financed. Inthis regard BANGLADESH BANK and SME FOUNDATION is playing a very important role.ADB has donated a huge amount of money for our SME development. BANGLADESH BANKis distributing that money very stratigically. It has given this money to many bank from itsdonated maoney. It has also gave some opportunity for women entrepreneurs. To encourage theenterpreneurs it has gaiven some grace period facilities. Banngladesh has so many potential andimportant sectors for SME those are mentioned avobe. Which banks are providing loan for Sme ,which banks are the largest giant on providing it are also mentoned through table and graph.Then here are some successful SME business ,just their names are mentioned. Here I have alsoadded some pictures from SME FAIR-2013. Here are also some area where SME is not touchedby people these areas are also shown avobe and also some recent activities of goernvent forSME.9. Conclusion:How SMEs Should ProceedKey steps for successful financing that have been outlined in this report can be summarized as: Seek the best financing product, most suitable for the business, on the best interest rate andother terms There are also a range of steps that can be taken to improve the prospects of securing fundingthrough building a relationship with the lender and the application process itself Finally, gaining access to finance should not be seen as only an end in itself, because changingthe business operation to satisfy the needs of lenders can also be in the interests of the SME (IB)We would also suggest that SMEs consider whether it makes sense to seek a loan from an MFI,at least initially. Their NGO background makes MFIs more aligned with the concept of an IB.whilst their level of real SME lending is limited, some MFIs also offer business developmentservices, which could serve as a platform for adapting a business to be more suitable for bankfinancing. There is also the SME Foundation although it tends to be more focused on industryresearch rather than practical advice.Some Possible ChangesIn conclusion, it should be mentioned that the market for the funding of SMEs will continue toevolve over time. At present, the government and donors have indicated a strong commitment tothe sector, with many initiatives on the funding and advisory side. Moreover, other changes arelikely, such as the introduction of guarantee schemes, more equity investment funds and betterdata publication.
P a g e | 20REFERENCE: http://www.bangladesh-bank.org/sme/index.php http://www.smef.org.bd http://www.thedailystar.net/newDesign/news Image from: SME Fair 2013