Bank loans

91% of SMEs do not obtain bank loans

| Updated:
Aug 15, 2022 8:57:04 a.m.

Commercial banks are reluctant to lend to small and medium-sized enterprises (SMEs) despite the sector being the backbone of the country’s economy, experts said on Sunday.

“Commercial banks extend only 18% of their total disbursed loans to the country’s SME sector, which has been extended to only 9.0% of SMEs. The remaining 91% of SMEs are deprived of lending assistance from banks,” said FBCCI Group Advisor and CPD Research Director Dr Khondaker Golam Moazzem.

Lending to SMEs as a proportion of total bank lending has been declining in recent years, which is risky for the country’s sustainable development, he added.

Moazzem was speaking at the seminar “Bangabandhu’s reflections on SME development and the current context” in Dhaka.

According to the World Bank, the country’s potential SME lending market is Tk 266 billion, according to UNB.

“But the SME sector is neglected in the bank’s credit structure. So banks don’t pay attention to this highly profitable sector,” Moazzem said.

Industry Minister Nurul Majid Mahmud Humayun said: “Banks have not been allowed to make profits by selling dollars only. Making profits is not just for the banks.

“It is not the banks’ job to widen the urban-rural disparity by lending to large customers in urban areas. Rather, it is their responsibility to work for balanced development.”

FBCCI Chairman Jashim Uddin said SMEs are the backbone of the economy. “But banks are reluctant to lend in this sector. They prefer to lend to large customers.”

Noting that financing is the main problem for the SME sector, the FBCCI Chairman said that the Prime Minister had announced a Taka 220 billion incentive package for the SME sector.

“But the disbursement of loans (of incentive schemes) to the SME sector was not completed within two years while the loans to the large sector were disbursed within three months,” said the chairman of FBCCI. .