 | The emergence of a new era in Bangladesh
19 May, 2011
The SME ecosystem in Bangladesh is evolving. The interest of the government and regulatory bodies here is also laudable. With establishment of the SME Foundation and incorporation of the SME credit policy and programmes by Bangladesh Bank, a new era has been envisioned.
The sheer interest and far sightedness of all is leading the sector of 'Small and Medium Enterprises' to emerge and the Bangladesh economy to reach a level of dignity.
Amid regulatory conditions prevailing in the marketplace, there is the central notion of fixing of the rates on savings and loans in a free market dynamic. As a result, financial institutions must now focus growth on small and medium portfolios, the likes of which include SME entrepreneurship and medium industry financing.
It is true to say that banks can only have limited exposure of their total asset portfolio in SME lending specifics and in face of high inflation rates, the focus on such exposure must now trends upwards to fill the shortfall in economic growth. It may be wise to now diversify these growth engines that can provide a multiplier effect to the lower echelons of the social fabric.
Considering a genetic view, banks, instead of specialising, should now diversify into all feasible sectors of SME to retrieve routine revenue and to form better buffer against the risks of only lending to corporate enterprises and overlooking the rest. Indeed, one may very rightly argue that in times of a credit crunch, the risk-reward relation is steeper on individual portfolios, which yields beyond corporate exposure so as to justify the added risk, and it may not be wise to bound financial institutions in the growth of this high yielding sector.
The success of microfinance for a number of decades has paved the way for more formalised SME lending in Bangladesh. Considering the impact of the upward mobility of our society, we need to urgently consider restructuring the growth of the SME borrowers who have the habit of making regular repayments with a minimum load on non-performing-assets on the bank's balance sheet.
SMEs make up 75 percent of the domestic economy. There are about 60 lakh SMEs and micro enterprises in Bangladesh, according to Asian Development Bank (ADB).
On a recent survey, it proves that the sector now contributes up to 25 percent to gross domestic product and accounts for about 40 percent of manufacturing output, 80 percent of industrial jobs and nearly 25 percent of the total labour force.
Release link:http://www.thedailystar.net/newDesign/news-details.php?nid=186241
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