Salespersons are seen at a stall of the SME fair at the BICC, also known as the Bangladesh-China Friendship Conference Center, in Dhaka on Nov 24, 2022 — Xinhua Photo It is deeply concerning and indeed a great injustice that female entrepreneurs of the small and medium-sized enterprises hardly have access to collateral-free loans from commercial banks. This is even after the Bangladesh Bank's directive to provide Tk2.5 million loans to female entrepreneurs without any collateral. It's almost a man's world entirely.
This issue was highlighted at a recent roundtable discussion entitled "Bridging the Gap: Regulation and Practices for Better Credit Access to Women Entrepreneurs." The discussion emphasised the ongoing challenges women entrepreneurs face in accessing the financial support they need to grow their businesses. Experts at the event urged stakeholders to continue working towards making financial services more inclusive and accessible for women. They also highlighted that several factors hinder women's access to loans, including collateral requirements, high-interest rates, and a lack of clear information about banking procedures.
Women-led businesses represent a small yet significant portion of Bangladesh's SME landscape. According to the Labour Force Survey 2022, female entrepreneurs account for only 7.2 per cent of business owners, and 99 per cent of these are micro, small, or medium-sised enterprises (MSMEs). Data from the Bangladesh Bureau of Statistics (BBS) indicates that women own 2.8 million SMEs, constituting around 24.6 per cent of all SMEs nationwide. Research by the Bangladesh Institute of Development Studies (BIDS) further shows that these women-led businesses employ approximately 8.4 million individuals, underscoring their vital role in job creation and economic empowerment.
SMEs are considered to be the backbone of the country's economy, contributing 28 per cent to the nation's GDP and accounting for 90 per cent of private sector jobs. However, the current SME financing structure is far from adequate for women entrepreneurs, which is stifling the growth of their businesses. Despite numerous government initiatives aimed at fostering women entrepreneurship, access to formal credit channels for women entrepreneurs remains disappointingly low.
The National Industrial Policy 2016 stipulates that at least 15 per cent of SME loans should go to women entrepreneurs. Yet, women currently receive less than five per cent of total loans. This shortfall points to significant gaps between the policy and banking practices, which continue to impose stringent requirements on women borrowers, including the need for collateral, guarantors and complex documentation processes. Moreover, banks often require extensive transaction histories and 'established business space' for loan applications, both of which many new entrepreneurs lack. Moreover, even when loans are granted, they often come with immediate repayment requirements, leaving little to no grace period for new businesses to get on their feet and begin generating revenue. This puts considerable pressure on nascent enterprises, particularly those run by women in the micro and small sectors, which require time to invest and build stability.
Another critical issue hampering the progress of women entrepreneurs is limited access to skill development and training, especially in rural areas. Though the SME Foundation plays a crucial role in supporting women entrepreneurs, including through marketing assistance at fairs and expos, there is still much room for improvement. The foundation offers one-stop services at its Panthapath office, providing essential guidance on establishing businesses. However, expanding these services to include more widespread skill development initiatives, such as vocational training in high-demand trades, could significantly enhance women's capacity to build sustainable businesses.
Apart from that the government allocates a portion of the national budget to foster women's entrepreneurship, but these funds often remain unutilised due to a lack of structured planning and effective allocation. This is a missed opportunity for nurturing women-led SMEs, which could greatly benefit from improved financial planning. Creating a yearly, collaborative plan with women's chambers of commerce and relevant stakeholders could ensure that allocated funds are utilised effectively. A well-designed plan would focus on capacity building through targeted training programmes in areas such as financial management, marketing, and regulatory compliance. This approach would not only bridge skill gaps but also support women entrepreneurs in navigating the complexities of formal business practices.
The following suggestions could improve access to financing and support the growth of women-led SMEs.
The SME Foundation and Bangladesh Bank should actively disseminate information on available financing options. Outreach initiatives could include workshops, partnerships with local women's groups, and digital platforms to reach more potential borrowers across urban and rural areas.
Simplifying loan processes is also a must. Banks should streamline their documentation requirements to make loan applications less cumbersome. Reducing collateral demands, offering at least three months grace periods, and minimising the guarantor requirement would allow more women entrepreneurs to access formal credit.
A larger portion of the budget should be directed towards training initiatives that focus on practical business skills. Courses in financial management, marketing, and compliance with regulatory standards could help women entrepreneurs build stronger, more competitive businesses. Expanding vocational training tailored to local market demands would not only promote self-reliance but also open employment avenues for other like-minded women.
The SME Foundation should host more fairs and exhibitions that allow women entrepreneurs to showcase their products and services and meet with and learn from other entrepreneurs. Providing visibility and networking opportunities at these events would facilitate access to wider markets and encourage collaboration within the entrepreneurial community.
Managing loans can be challenging and stressful for new entrepreneurs. The SME Foundation could play a pivotal role by offering financial management guidance, helping women entrepreneurs navigate loan repayment plans, budgeting, and accounting.
For Bangladesh to fully harness the economic potential of women-led SMEs, the financial sector and government institutions must work in tandem to remove structural barriers. Ensuring that banks follow government directives on loan allocation, simplifying application procedures, and providing robust training programmes would create a more supportive environment for women entrepreneurs. With these changes, women-led SMEs could flourish, contributing not only to the growth of individual businesses, but also to the country's economy and social fabric. Addressing these systemic issues in a collaborative manner will ensure that policy ambitions translate into tangible progress, empowering women entrepreneurs to succeed in an increasingly competitive marketplace.
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