MFIs funding 'fails to improve poverty situation significantly'

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FE Report
Adviser to the Prime Minister HT Imam Wednesday said funding by the micro-finance institutions (MFIs) to the poor has not improved the country's poverty situation significantly.
"We provide a lot of money to the MFIs. But it is now time to evaluate how many people have graduated to self-reliance from their poor condition after receiving the financial support," he said at a seminar in Dhaka.
"I think the graduation of the poor people to self-reliance are not so high in number," Mr Imam said adding that all financial institutions should rather finance the small and medium enterprises (SMEs).
Dhaka Chamber of Commerce and Industry (DCCI) and SME Foundation jointly organised the seminar on "Access to SME financing: reforms in policy & regulatory framework".
The seminar was presided over by the former finance and planning adviser to the caretaker government Mirza Azizul Islam. Ex-Governor of the Bangladesh Bank (BB) Dr Salehuddin Ahmed presented one keynote paper.
Bankers, financial analysts, entrepreneurs, government officials and researchers took part in the discussion.
HT Imam was critical about the present SME banking of commercial banks and said the banks neither finance the small and medium industries nor give any special incentives to the best-performing borrower for timely repayment of loans.
"When a borrower repays all his loans at a time, you (banks) don't offer him any special incentives but rather encourage the customers to repay the loan instalments spread throughout the lending period which creates room for becoming defaulter," he said.
"Go to the small and medium entrepreneurs especially to the women with adequate funds as they have lesser chance to be a defaulter than the large borrowers," the adviser to the Prime Minister said adding the SMEs are capable of creating maximum employment in the country.
Bangladesh's SME sector has nearly 20 per cent contribution to the gross domestic product (GDP) and has over 40 per cent contribution to the total employment.
Dr Salehuddin Ahmed said over the past three decades economic policy biases and poor implementation of different promotional programmes have often put constraints on SMEs growth and might have diminished the positive effects of direct credit and technical support to them.
"Bangladesh SMEs grew without an integrated approach and sound backing from the formal sector. Finances of SMEs in Bangladesh have come either through equity or from informal sources like family and friends," he added.