Increased activities of bank branches coupled with easy access to credit facility could significantly help improve output of the small and medium enterprises (SMEs), a study has revealed.
According to it, only one per cent growth of bank branches in a Thana area would increase firms' output as well as labour productivity by 2-3 per cent.
The study also suggested adopting specific plans and incentive mechanism for the formal banks to expand their services to even deeper grassroots level, aiming to help the SMEs grow further.
The study paper titled 'Local Finance Development, Access to Credit and SME's Performance: Evidence from Bangladesh' was presented at a technical session on the first day of a two-day conference that began on Sunday.
Bangladesh Institute of Development Studies (BIDS) hosted the conference titled 'BIDS Research Almanac 2018' at a city hotel.
The technical session titled 'SME Productivity, Financing and Women Entrepreneurs' was chaired by Executive Director of the Economic Research Group Dr Sajjad Zohir.
Assistant Professor of Development Studies Department of Dhaka University Subhasish Barua took part in the discussion, among others.
A total of three study papers were presented by the researchers from various organisations, including the BIDS.
Senior Research Fellow of the BIDS Monzur Hossain presented the study paper on local financial development.
According to the study, the loan default risk is likely to be reduced in tune with the branch network expansion and, therefore, better small and medium businesses get access to credit at a reasonably lower rate.
The paper also said that easy access to loans improves the firm's revenue and productivity and makes them more competitive.
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