This document discusses SME financing in Bangladesh. It begins with an introduction to microcredit and SMEs, noting their importance for economic development and job creation. It then provides definitions for small and medium enterprises. The bulk of the document discusses steps taken by Bangladesh Bank to promote SME financing, including refinance schemes, dedicated desks in banks, and targets for SME loan disbursement. Special arrangements are outlined for women entrepreneurs, including allocating 15% of refinance funds for women and interest rates not exceeding 10% for women borrowers. Potential sectors for SMEs in Bangladesh are also listed, including agro-based industries, fishing, IT, clothing, and retail.

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1.INTRODUCTION
The perception of the report is SME financing, SME applicable sectors in Bangladesh. Access to
credit is now considered as „human right‟ not „gift‟ or „sympathy‟ of an individual or an
institution. Recently there has been a phenomenal growth in activities of microcredit in many
Countries, especially in the developing countries in the world. The first Microcredit Summit
Meeting held in Washington,DC, USA in 1997 has added a momentum in a global movement to
reach 100 million of the world's poorest families, especially the women of those families, with
credit 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 of
Microcredit calls for building inclusive financial sectors and strengthening the powerful, but
often untapped, entrepreneurial spirit existing in communities around the world (International
Year 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 ever
since. The recent global outburst of interest in SMEs has brought the issue on to the center-stage
of academic discourse as well as of governmental policy making process, especially backed by
proactive donor support. The roll of small and medium enterprise (SMEs) is indispensible for
overall economic development of a developing countries like Bangladesh. Since this is labor is
intensive with short gestation period, it is capable of increasing national income as well as rapid
employment generation; achieving millennium development goals (MDGs) especially
eradication of extreme poverty and hunger, gender equality and women empowerment. SME
sector 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 economic
growth, narrowing the gap of income inequality and poverty alleviation. The present government
has also put much emphasis on the development of SME sector considering it as „the driving
force for industrialization‟.

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2. Definitions Small and Medium Enterprises (SMEs)
Small Enterprise refers to the firm/business which is not a public limited company and complies
the followings criteria:
Medium Enterprise refers to the establishment/firm which is not a public limited company and
complies the following criteria:

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3.SME Financing In Bangladesh
This is the right time to focus on the experiences of Bangladesh, the birthplace and the country
with the biggest and most vibrant microfinance sector. This is because the microcredit movement
is in mature stage in our country, and we have a clearer picture of its strengths as well as
limitations. Necessarily, to move forward for a sustainable achievement, we need to be more
effective, and increase outreach, design products to include the poorest, and also provide finance
for growth and employment oriented SMEs which are needed to spread the poverty alleviation
net wider, so that significant decline in poverty takes place. This paper is an updated extension of
an earlier paper titled “the Denationalized Commercial Banks‟ Contribution in Developing Small
and Cottage Industries (SCIs) in Bangladesh” and summarizes the SME financing experiences of
the country over the years, and the contribution of different commercial and specialized banks in
developing this sector. For this purpose financial contribution of different types of bank from
1991 to 2005 (June) has been reviewed. Moreover, it tries to emphasize on the importance of
developing SMEs in the country as well as the obstacles the entrepreneurs are facing in shaping
their 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 and
expand SME Enterprises. Refinance scheme funded by Bangladesh bank, IDA, ADB has been
facilated for the development of SME Sector. Besides, to ensure institutional financial facilities
under easy conditions Bangladesh Bank has taken diverse steps: like opening of „Dedicated
Desk‟ for SME and „SME Service Centre‟ in the banks and special facilities for the women
entrepreneurs. 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 to
include all segments of people in the growth process through facilitating credit to the sectors
where less attention has been given due to present market mechanism, specially, in agriculture
and SME sector. Reasonably, a new department namely‟SME and Special Programmes
Department‟ has been established in Bangladesh Bank recently will be solely responsible for
policy formulation, facilitating fund, monitoring and development of entrepreneurship in the
SME sector.
The guidelines formulated by the newly created department for compliance of the banks and
financial institutions for the development of SME sector are enumerated below:

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For the first time in Bangladesh, an indicative target for SME loan disbursement has been
set
for 2010 by the banks and financial institutions considering SME development as one of the
most important development agenda of the country. According to the target, SME loan shall be
disbursed to the small, medium and women entrepreneurs.
Following the 'Area Approach Method' banks/financial institutions will try to attain their
indicative targets separately by dividing it as branch wise, region wise & sector wise.
Each bank/financial institution shall follow a separate business strategy in financing SME
loan
with least formalities in executing documentation to ensure easy and speedy loan sanction and
disbursement process.
Priority shall be given to small entrepreneurs. For small entrepreneurs credit limit will be
ranged from Tk. 50,000 (Fifty thousand) to Tk.50,00,000 (Fifty lac).
For more participation of women entrepreneurs in industrial development of the country
and
for conducting business activities by women entrepreneurs in large number, priority shall have
to be given to potential women entrepreneurs in respect of SME credit disbursement.
Banks & Financial Institutions shall put highest priority in receiving loan application
from small
and medium women entrepreneurs and settle the loan disbursement process within very
reasonable 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 SME
financing 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 Programmes
Department of Bangladesh Bank within two months from the date of declaration of this
policy
and programme.
Banks and financial institutions may sanction up to Tk. 25,00,000 to women
entrepreneurs
against personal guarantee. In that case, group security/social security may be considered.
The success in SME loan disbursement will be considered as yardstick for further
approval of
new branches of the concerned bank. License for New Branches will be issued for financing the
priority 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 like
SME and Agriculture’.

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Each bank/financial institution shall fix the interest rate on SME loan sector/subsector
wise.
However, bank/financial institution will inform Bangladesh Bank sector/sub-sector wise rate
of interest immediately and ensure disbursement of refinanced fund to the clients (women
entrepreneurs) 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 the
mainstream of economy is crucial for attaining sustainable economic growth & poverty
reduction. But women participation in institutional economic sector is inadequate & the rate of
women entrepreneurs is very low compared to that of male counterparts. In fact, there exist many
obstacles in women participation in the mainstream of economy although the degree of integrity,
devotion, creativity and expertise of women society make us surprised. Especially women
participation in micro credit programmes and readymade garments industry is contributing
significantly to the country‟s industrialization. Similarly, participation of women entrepreneurs
in SME sector is vital forth flourishing of Bangladesh economy. Meantime, Bangladesh Bank
has taken some steps and formulated a guideline for the banks & financial institutions to ensure
more institutional financial facilities for women entrepreneurs in SME sector.
a. With a view to organizing and making uniform industrial development and to ensure
institutional
credit facilities, at least 15% of total BB refinance fund for SME sector has been allocated for
women entrepreneurs.
b. Interest rate for women entrepreneurs will be Bank rate (which is at present 5%) plus
maximum
5%; i.e. not more than 10% per annum.
c. Banks/Financial Institutions will accept and settle all types of loan applications of SME
women
entrepreneurs with the highest priority.
d. Banks and financial institutions shall take initiative to advertise all the facilities for women
entrepreneurs in both electronic & print media.
e. Banks and Financial Institutions may provide a maximum loan facility of Tk.25, 00,000/-
against
personal guarantee if borrower is woman or majority of the owners of the enterprise are
women.
f. Banks/Financial Institutions shall establish special advice and service centre for women
entrepreneurs in selected branches and ensure service friendly approach towards women
entrepreneurs.

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3.3 Grace Period:
The entrepreneurs often raise complaints regarding short duration of grace period for repayment
of ME loan. Therefore, banks and financial institutions will consider the reasonable
grace/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 SME
credit. 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 the
respective 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 directions
to keep the interest rate within a tolerable limit. Bangladesh Bank is providing refinance facility
to banks and financial institutions at bank rate (at present 5%) in SME sector. The fund obtained
at 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 Disbursement
Serial No. Banks & Financial Institutions Target(Tk.in core)
1 State-owned Commercial Banks 3,897
2 Specialized Banks 600
3 Private Commercial Banks 17,478
4 Foreign Commercial Banks 707
5 Non-Bank Financial Institutions 1,313
Grand Total: 23,995

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3.7 Bank-wise SME Service Centre
Serial
No. Name of the Bank
Existing SME centre
Total
2008 2009
1 IFIC Bank Ltd. 2 3 5
2 Islami Bank Bangladesh Ltd. 10 10 20
3 National Bank Ltd - 10 10
4 The City Bank Ltd 5 5 10
5 NCC Bank Ltd 4 4 8
6 Prime Bank Ltd - 5 5
7 South East Bank Ltd - 10 10
8 Dhaka Bank Ltd. 3 2 5
9 Social Islami Bank Ltd 5 5 10
10 Dutch Bangla Bank Ltd 5 5 10
11 Standard Bank Ltd 3 3 6
12 Mercantile Bank Ltd 3 - 3
13 The premier Bank Ltd - 5 5
14 Trust Bank Ltd - 5 5
15 Brac Bank Ltd 30 30 60
16 Mutual Trust Bank Ltd 5 5 10
17 Bank Asia Ltd - 10 10
18 Shahjalal Islami Bank Ltd 2 5 7
19 Jamuna Bank Ltd - 5 5
20 Commercial Bank of Ceylon 2 4 6
Grand Total: 79 131 210

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3.8 Largest Bank Leaders To SMEs

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3.9
Recent Activities of SME & Special Programmes of GOVT.
SME Entrepreneurs-Banker match making event
Meeting on Agroprocessing Industries in rural areas
Meeting with Bangladesh plastic Goods Manufacturer's Association
Meeting with BIBM for carrying out a joint research program on Impact of SME financing
Steps taken for expediting the activities of Refinance Scheme for Agrobased Product
Processing Industries in Rural Areas
Open SME credit disbursement in Bogra
Women entrepreneur gathering and product display
Hilltracts enterprenure fair held at Rangamati in co-operation with Bangladesh Bank
Roundtable on e-Commerce and Online business opportunities for SME entrepreneurs
SME Loan Disbursement to Rural Area (January-September, 2012)
Women Entrepreneneur's fair Deshojo Ponno Mela inaugurated
Banker-Entrepreneurs meeting Sherpur
SME Program in Dikpaits and Jamalpur
Discussion with the Representatives of Banks/NBFIs Regarding SME
JICA, IFC and Bangladesh Bank join hands to promote medium to long-term financing
among the entrepreneurs
Meeting with BUILD
Meeting with Bankers and Entrepreneurs in Sirajgonj
Meeting with DFID Consultants on Credit Guarantee Scheme for Micro, Small and
Cottage Enterprise (MSCE) under DFID assisted Financial Inclusion Project, Bangladesh
(FIPB)
Capacity Building Training Program for Participating Financial Institutions (PFIs) under
JICA assisted FSPDSME Project
Meeting with the representatives of Banks/NBFIs (PFIs)
Initiative for development of shoe cluster at Bhairab
Farmers & agro-based industry entrepreneures gathering at Narshindi
Exchange of views program for women entrepreneures at Mymenshing
Bangladesh Bank and Mutual Trust Bank Officials visit Prothibondhi Community Centre
at Mymensingh
Research Workshop on "An Evaluation of SME Refinancing Programs by Bangladesh
Bank"
Exchange of Views with SME Bank-Enterprenure in Satkhira
Visiting cluster at Satkhira
Meeting with First Secretary (Eco & Projects), High Commission of India
Capacity Building Training Program for Bank and NBFI Officials under JICA assisted
FSPDSME Project
Exchange of Views Programmes with Women Entrepreneurs in Sylhet
Initiatives for Farmers, Agrobased Industries & Women Entrepreneurs.
Meeting with Bankers for Developing Jamdani Cluster
Meeting with Executive Vice President, Asian Institute of Development Studies,
Philippines
Preparatory Meeting: Training to the PFIs Regarding JICA funded FSPDSME Project
Greetings & best wishes for the Development of Women Entrepreneurs

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Cluster Development Initiative on Jamdani handicraft
Meeting with Women Entrepreneur manufacturing rice bran oil
Meeting with Women Entrepreneur Association of Bangladesh (WEAB)
"SME Credit Risk Management" Training Program
Banker-Entrepreneurs gathering and Cluster development Program Small Garments
Industry Cluster at Jinjira, Keranigonj
Workshop on SME Financing for software and IT services sector-Problems and Prospects
Meeting with Airtel for SME Promotion
Initiatives for Helping Working Handicapped Women
Meeting with Airtel for SME Promotion on October 08, 2012
Information Dissemination Session about JICA funded FSPDSME conducted by SME
Foundation
Workshop on Women entrepreneurs: Problems & Prospects
Workshop for skill development of women entrepreneurs
SME & Special Programmes Department of BB extended hand of cooperation towards
women Entrepreneurs
Meeting with DFID Representatives for SME Development
Meeting with PFI's for financing to SME's under JICA finance FSPDSME project
Views Sharing Meeting organized by BWCCI
Meeting with BASIS
Exposure Visit of GM of SMESPD to India on SME Knowledge Sharing
Meeting with the delegation of Frankfurt School of Finance & Management
SME Performance for January-June, 2012 period - At a glance
SME Enterprenure Meeting at Jessore
GM visit Keshabpur wood made show-peice industry cluster
Summarized Statement of Industrial Credit, June 2012
Meeting with IFC and Windmill Corporation
Meeting with the Executives of Bangladesh Mudran Shilpa Samity
Meeting with Grameen Phone for SME Promotion
Meeting with ROBI for SME Promotion
Special SME Initiative
DG-1 visited Chittagong for expediting SME credit Program
SME Performance: January-June 2012
SME initiatives by SME & SPD, Month : June 2012
SME initiatives by SME & SPD, Month : May 2012

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4. Potential SME SECTOR: Bangladesh has a lot of potential sectors for applying
SME. These sectors are mentioned below
Serial
No.
Name of Sectors Serial
No.
Name of Sectors
1 Agro based and agro processing
industry
33 Telecommunication
2 Agro tools making and marketting 34 Old iron goods
3 Fishing boat building 35 Mobile set and acccesories
4 Nakhshi kanta and handloom 36 Electronic business
5 Food seed preservation 37 Fertilizer tools
6 Bakery 38 Jute trading
7 Hatchery 39 Clothing and shoe business
8 Dry fish processing 40 Rod and cement business
9 IT- based activities 41 Hardware business
10 Computer softoware and ICT goods 42 Crockery business
11 Cyber café 43 Grocery and chaff goods
12 Forestry and furniture 44 LP gas business
13 Horticulture, floriculture 45 Warehouse and contiasner business
14 Cold storage 46 Printing and packaging
15 47 Plastic industry
16 Hospital and clinic 48 Cosmetic industry
17 Handicrafts 49 Railway slipper manufacturing
18 Herbal medicine industry 50 Production of lime from oyster
19 Jute goods and jute mixed goods 51 Manufacturing of cement pillar
20 Stationery goods industry 52 Catechu production
21 Transport communication 53 Oil and pulse mill
22 Laboratory 54 Mini sugar mill
23 Jewellery 55 GI pipe producing industry
24 Ginning ang baling 56 Hosiery
25 Tailoring 57 Welding industry
26 Saloon and beauty parlour 58 Bronze and brass industry
27 Community centre 59 Partex industry
28 Diagonstic centre 60 Biogas plant
29 Call cebtre 61 Wood and steel goods business
30 Digital colour lab 62 Paddy rice business
31 Cable operators 63 Boutiques
32 Generator 64 Small amusement park

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5. SMEs Industry Produced Product At A Glance:
HANDICRAFT

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ENVIRONMENT FRIENDLY PAPER GLASS
POTTERY

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SMALL MEDICAL HELP
JAM JELLY

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MUSHROOM PRODUCT
SOYABEAN OIL

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LEATHER SHOES
6. Industrially undeveloped area:
Division District
Dhaka Narshingdi, Naryanganj, Manikhanj, Munshiganj,Gajipur, Jamalpur,Tangail,
Kishorganj, Netrokona,B.Baria, Dhaka
Rongpur Ponchogor,Thakurga,Dinajpur,Nilfamari,Lalmonirhat.Kurigram,Gaibandha
Khulna Chuadanga,Meherpur,Kustia,Jhinaidoho,Magura,Norail,Joshor,Satkhira,Bagerhat
Borisal Jhalkathi, Pirojpur, Potuakhali, Borguna, Vola
Syhlet Sunamganj, Moulovibazr, Hobiganj
Chittagong Khagrachori, Rangamati. Bandorbon
Rajshahi Joypurhat, Nowga, Chapainobabganj, Natore, Sirajganj, Pabna

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7.Some Successful SME business in Bangladesh:
LEATHER INDUSTRY:
Al-Amin leather crafts(leather & jute handicrafts)
Vegas shoe international(hand made shoe)bsutic
Leather 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 product
Rongmelabuticks(noksikatha,block printed dresses)
JUTE INDUSTRY:
Golden fiber and yarn
Intred ltd
HANDICRAFTS:
Time expo
Sokhcraft(various accessories)
Ion craft(jute product)
Allimpon craft
Soilpikcrafts(showpieces)
Jackfruit toys(bag)
Bimurto(hand made paper product)
PNP corporation(garments, leather goods)
Pierlessenterprise(home decorative items)
Delta pets(handmade pet home)

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Eco 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 plastic
ENGINEERING 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)

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8.SUMMARY: This report wrestles with how SME in Bangladesh is being financed. In
this 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 BANK
is distributing that money very stratigically. It has given this money to many bank from its
donated maoney. It has also gave some opportunity for women entrepreneurs. To encourage the
enterpreneurs it has gaiven some grace period facilities. Banngladesh has so many potential and
important 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 also
added some pictures from SME FAIR-2013. Here are also some area where SME is not touched
by people these areas are also shown avobe and also some recent activities of goernvent for
SME.
9. Conclusion:
How SMEs Should Proceed
Key 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 and
other terms
 There are also a range of steps that can be taken to improve the prospects of securing funding
through 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 changing
the 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 development
services, which could serve as a platform for adapting a business to be more suitable for bank
financing. There is also the SME Foundation although it tends to be more focused on industry
research rather than practical advice.
Some Possible Changes
In conclusion, it should be mentioned that the market for the funding of SMEs will continue to
evolve over time. At present, the government and donors have indicated a strong commitment to
the sector, with many initiatives on the funding and advisory side. Moreover, other changes are
likely, such as the introduction of guarantee schemes, more equity investment funds and better
data publication.

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REFERENCE:
 http://www.bangladesh-bank.org/sme/index.php
 http://www.smef.org.bd
 http://www.thedailystar.net/newDesign/news
 Image from: SME Fair 2013

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