Introducing standardized loan application process

Money makes businesses move. Usually we take loans from banks and banks provide us with loans for operation of businesses. But banks and financial institutions of our country maintain very complex administrative procedures which are beyond the understanding of many small savers and rural masses. Different private and public commercial banks maintain varying loan granting procedures which are sometimes obscure for the common people. The documentation process for awarding loans is not the same for all banks. One bank asks for 11 documents while another one demands 23. Small enterprises and investors are sometimes unable to present their accounting records and other documents required by banks due to lack of knowledge.
To complete the loan application procedures, borrowers are required to have reading and writing skills as processing of loan request is quite complex. Even when approval is obtained, loan delivery is slow. Before disbursement of loans, banks in Bangladesh want various documents like, sanction letter, letter of stocks and goods, letter of undertaking, general loan agreement, guarantors etc. At every step from sanctioning to disbursement of loans, the procedure is quite lengthy. As many of the customers from remote areas lack financial education to understand the suitable products of the banks, it is essential that banks should include the system to communicate with the clients and make them understand their products.
Small and Medium Enterprises (SMEs) play a vital role in poverty alleviation and industrialisation of developing countries like that of ours. Loan granting procedures and documents leading to the sanction of loans should be made easy at all banks and financial institutions to scale up the growth of SMEs in Bangladesh.
Therefore private and public sector should work together to find out possible solution for the clients. Linkages have to be searched at client and institutional levels. Formal sector institutions do not have close contacts with the environment they operate in. That is why they do not know about the confusions experienced and impediments encountered by the clients during the period of receiving loans. As banks demand diverse documents and the required number of documents is also not the same at all banks, the clients feel perplexed while applying for loans. A common and standardised format should be followed in all banks for sanctioning loans. A standardised application form should be developed preferably by the Bangladesh Bank and made mandatory for all banks and financial institutions regardless of public and private ones. A standardised format will be easy to operate, monitor and implement and will leave very little scope for mistakes. It will be convenient for the intending borrowers to follow and at the same time tracking of each loan receiving case by the authorities concerned will be made easier.  
The writer is a student of Dhaka University.
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