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SMEs need boost from formal banking channels, say speakers

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Commerce Reporter
Speakers at a seminar in Dhaka on Monday said millions of small and medium enterprises (SMEs), cottage and micro sector businesses that have remained out of formal banking channel need a big push with proper backing from larger financial institutions.
They said introduction of smart cards like bank debit cards with financial facilities could be an option to begin with.
The seminar titled ‘Uttaron-In Promoting Sustainable & Inclusive Finance for SME & Farmer and Discussion on SME Card’ was held on Sunday at the office of the United Nations Industrial Development Organization (UNIDO).
Experts from the Bangladesh Bank, United Nations, BRAC, European Union-funded projects, NRB Bank, Uttaran and Aurora attended the program 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 Depart-ment of the Bangladesh Bank, said the central bank has a favorable policy to bring the SMEs and cottage and micro industries under a greater financial inclusion scheme.
He said since the SMEs and small industries are playing a vital role any effort to bring them under an integrated approach will get support from the central bank that regulates the banking sector. “But things have to be in place under the existing policy and in conformity with banking rules and regulations.”
Millat said they are ready to discuss possibilities to extend their support to the ambition of bringing the vital cottage and micro businesses under a greater financial regime.
The experts said currently only 35 percent of the country’s 7 million SMEs can avail of formal banking facilities and the rest remains untapped despite huge potentials of the sector. The country’s burgeoning cottage and micro industries terribly lag behind in the case of 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 people has a tremendous positive impact.
He said people who are involved with the SMEs or cottage industries could be helped by linking them with the formal banking channels.
Now Zahid said the smaller businesses mostly take money from NGOs and individual loan providers, but if they are connected with the formal financing institutions like banks and other non-banking financial institutions their contributions to the economy would be greater.
“With skill development training on basic accounting, risk management and shock absorption the SMEs would be better equipped to repay their loans. Thus the commercial banks can make more profit,” he observed.
The speakers agreed that the introduction of smart cards that would be used 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 could be a good plat-form as they have the experience of handling grassroots people involved with the SMEs, especially in northern Bangladesh, in piloting a project for financial inclusion of small 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 would benefit the SMEs and other smaller businesses.
He said the use of technology would increase the business efficiency of the SMEs enabling them to take chal-lenges.
NRB Bank’s Deputy Managing Director Khurshed Alam said they were ready to roll out new loan products for the SMEs, cottage and micro businesses, but the low interest rates could be a major challenge.
He said if they get policy support from the government his bank would be able to take more pro-active approach in helping the SME sector.
Ali Sabet, Team Leader of the EU GoB-funded Prism Bangladesh project, was optimistic in devising a way for the SMEs so 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.