Creating condition for SMEs to deliver
Friday, 8 June 2007
LARGE scale operators in trading and industry including some state-owned non-productive sectors have relatively better access to generous credit from the nationalised as well as the privately-run banks and other financial institutions. The reason is that those enterprises can provide the necessary collateral and pay the high rate of interest charged by the banks. But the same is not true for the small and medium industries (SMEs). A large number of these enterprises are successful as instances of self-employment and job creation. These also contribute significantly to the economy. The size of capital used to operate SMEs is obviously small.
The seed money is usually obtained from family savings, personal loans as well as loans from informal sources. The acronym SME may be a misleading term to many. Because, the types of enterprises falling under this category range from very small-scale, individually or family-run ventures with a capital of few thousand takas to moderately large enterprises employing some paid workers and staff with capitals varying between some hundred thousand and millions of taka. Understandably, the problems and needs of these diverse kinds of enterprises also differ. As a result, despite the broad consensus among all the stakeholders including the government on the economic importance of this sector since long, nothing palpable has been done to address its problems. The question of creditworthiness of the SMEs has long been debated among the concerned quarters and the government, but precious little has been done thus far to bring the financial resources of the banks to the doorstep of the SMEs. Consequently, in most cases the enterprises have to fend for themselves.
Small wonder, the issue has again been brought to the fore at a seminar organised the other day by the Federation of Bangladesh Chambers and Industries (FBCCI). On this score, the chairman of the SME foundation made it known that they had recommended that the Bangladesh Bank should allocate fund for the SMEs and send it directly to the commercial banks for onward disbursement to the enterprises applying for loans. As expected, this is again the case for giving special treatment to the SMEs and creating fund dedicated to their cause. The recommendation makes sense in the absence of a comprehensive policy of commercial banks to extend generous and sustainable financial assistance to the SMEs in need. But just clamouring for funds, special treatments and assistances in order to have a share of the public funds and that too voiced from organisations and individuals who are remotely placed from the real operators on the ground is not the real answer to the problem at hand.
There is, however, no question that the SMEs must lay claim to their right to the available resources. What is being stressed here is the need for articulation, representation and active participation of the SMEs themselves in the entire exercise of putting their case before the appropriate authorities. For that they should have a stronger voice and more varied platforms to demonstrate their robust presence in the economy. Such platforms will not only serve as a good bargaining tools to negotiate with the government and the financial institutions, those would also help pool the SMEs' own resources and create the condition for experience-sharing, better communication and networking among operators engaged in identical types of trades.
It is really unfortunate as well as absurd that the SMEs are yet to establish their right to easy credit from commercial banks at a time when the poorest of the poor in the economy can get collateral-free loans from micro-financing institutions (MFIs) like the Grameen Bank and a host of NGOs. Why then should the SMEs not have their own banks and other financial institutions? It is time all concerned gave a serious thought to the issue.
The seed money is usually obtained from family savings, personal loans as well as loans from informal sources. The acronym SME may be a misleading term to many. Because, the types of enterprises falling under this category range from very small-scale, individually or family-run ventures with a capital of few thousand takas to moderately large enterprises employing some paid workers and staff with capitals varying between some hundred thousand and millions of taka. Understandably, the problems and needs of these diverse kinds of enterprises also differ. As a result, despite the broad consensus among all the stakeholders including the government on the economic importance of this sector since long, nothing palpable has been done to address its problems. The question of creditworthiness of the SMEs has long been debated among the concerned quarters and the government, but precious little has been done thus far to bring the financial resources of the banks to the doorstep of the SMEs. Consequently, in most cases the enterprises have to fend for themselves.
Small wonder, the issue has again been brought to the fore at a seminar organised the other day by the Federation of Bangladesh Chambers and Industries (FBCCI). On this score, the chairman of the SME foundation made it known that they had recommended that the Bangladesh Bank should allocate fund for the SMEs and send it directly to the commercial banks for onward disbursement to the enterprises applying for loans. As expected, this is again the case for giving special treatment to the SMEs and creating fund dedicated to their cause. The recommendation makes sense in the absence of a comprehensive policy of commercial banks to extend generous and sustainable financial assistance to the SMEs in need. But just clamouring for funds, special treatments and assistances in order to have a share of the public funds and that too voiced from organisations and individuals who are remotely placed from the real operators on the ground is not the real answer to the problem at hand.
There is, however, no question that the SMEs must lay claim to their right to the available resources. What is being stressed here is the need for articulation, representation and active participation of the SMEs themselves in the entire exercise of putting their case before the appropriate authorities. For that they should have a stronger voice and more varied platforms to demonstrate their robust presence in the economy. Such platforms will not only serve as a good bargaining tools to negotiate with the government and the financial institutions, those would also help pool the SMEs' own resources and create the condition for experience-sharing, better communication and networking among operators engaged in identical types of trades.
It is really unfortunate as well as absurd that the SMEs are yet to establish their right to easy credit from commercial banks at a time when the poorest of the poor in the economy can get collateral-free loans from micro-financing institutions (MFIs) like the Grameen Bank and a host of NGOs. Why then should the SMEs not have their own banks and other financial institutions? It is time all concerned gave a serious thought to the issue.