Atiur slams critics of SMEs over NPL

Bangladesh Bank (BB) Governor Atiur Rahman Tuesday came down heavily on a section of critics, saying they become vocal against small amount of non-performing loan (NPL) by the small and medium enterprises (SMEs), but keep mum in case of the big defaulters.
He also said the rate of SMEs' NPL is lower comparing to large loans, and women entrepreneurs are the least defaulters. But still the banks are not interested to give loans to the SME sector, he said.
"If the large borrowers default any significant amount, then it is not a big crime. But if the small borrowers default even a meagre amount, we all look at them and start criticizing how badly the SME loans are used."
"SME helps us maintain equality, as one-third of the GDP comes from the lower segment of the population," said Atiur Rahman.
He was speaking at the national seminar on 'Sustainable Business Model for SME Banking' at Bangladesh Bank Training Academy in the city. BB deputy governor Abul Quasem and former deputy governor Khondkar Ibrahim Khaled were present as the special guests.
Eastern Bank Ltd (EBL) managing director (MD) and chief executive officer (CEO) Ali Reza Iftekhar and IDLC MD and CEO Selim RF Hussain presented keynote papers at the programme.
Referring to the examples of the default rate presented in the paper of Mr Selim, the BB governor said even during the time of political turmoil, the SME default rate was only 2.0 per cent, and it is even lower in case of the women entrepreneurs.
He emphasised risk management, NPL and client-focused SME programme by the banks and maintaining a respectful relation with the SME clients.
 "This depends on the commitment of the banks' senior management and how they love SME sector. Their commitment is the keyword to improve the sector. Bankers' mindset is more important for development of SME sector."
The BB governor said by providing SME loans the banks are doing good business and no charity. He also suggested increasing moratorium and reducing lack time for SME loans.
 "Financial stability is ensured, if a bank gives small loans to multiple kinds of depositors. If we want to ensure financial stability, we have to go to the small clients," he said, adding: last year investment in SME sector increased by 20 per cent.
In Bangladesh, National Commercial Banks (NCBs) contribute 13.32 per cent in the SME segment, Specialized Banks (SBs) 7.99 per cent, Foreign Bank (FBs) 1.95 per cent, Private Commercial Banks (PCBs) 73.65 per cent, and Non-Bank Financial Institutions (NBFIs) 3.09 per cent.
Referring to the foreign banks' participation in SME sector, the governor said the FBs' participation in SME is still low, for which BB will pursue.
In his presentation, Ali Reza Iftekhar said SMEs are the single largest industrial sector of Bangladesh economy. Moreover, sustainable SMEs development in the country can also help achieve Vision 2021.
According to Vision 2021, GDP can be raised 8.0 per cent by 2015 and 10 per cent by 2021. Contribution of industrial sector, mainly SMEs, to GDP can be doubled by 2021. The growth of manufacturing sector will have to be attained through improvement of existing enterprises and creating new ones.
The contribution of SME in GDP is 20-25 per cent in Bangladesh, and in terms of employment generation it employs 40 per cent of the total workforce.
In India the contribution of SME in GDP is 80 per cent, in Pakistan 15 per cent and in terms of employment 80 per cent, in China 60 per cent and employment 92 per cent, and in Japan 69.50 per cent and employment 72 per cent.
Selim RF Hussain said banks can achieve high margin through SME programmes and have low NPL.
He said ability and willingness of the SME borrowers to repay is outstanding. Even during the political unrest the NPL rate was about 2.0 per cent in IDLC, although the corporate NPL increased manifold at that time. The NPL rate of small businesses was better, and the women entrepreneurs' share was even lower.
 "Being respectful and providing quick access to loan is very important for building relation between SME clients and banks," he added.