Small biz investments can offset global shock

Bangladesh Bank (BB) governor Dr Atiur Rahman Sunday placed stress on putting more money into smaller businesses, saying the investments can help the country tide over possible external shock.
He also said it was the strategic shift of the central bank in 2009 to pump more money into the small and medium enterprises (SMEs) and agriculture sectors under financial inclusion programme that saved the country from the global economic crisis that afflicted most of the advanced economies.
"Small and medium enterprises are real and if you put money for real sector, you really create domestic demand. It's missing in Europe at the moment," said Dr Rahman.
His views came while addressing as the chief guest at the launching ceremony of 'Business Finance for the Poor in Bangladesh- Innovative Finance for Small Business' at a city hotel. Bank and Financial Institutions Division (BFID) Secretary M Aslam Alam and DFID Bangladesh country representative Sarah Cooke were present as special guests.
Dr Rahman said he promoted financial inclusion in the face of weakening external demand for readymade garments and other export items, which helped save the country from the global economic shock.
"While facing global financial crisis, Germans did better than many other countries around as it had more than 400 savings banks that went for the real sector," he said.
He noted that the central bank felt the need for offsetting sagging demand by creating internal demand through financial inclusion programme in 2009 when the developed world was having negative growth. SME financing constitutes now 30 per cent of the total loan portfolio.
"Despite weakening external demand, stronger internal or domestic demand really makes us comfortable in this six plus growth despite political problem," he said.
The new programme is a Euro 22.5 million five-year project aimed at increasing financial inclusion in neglected market sectors by encouraging additional outreach on the part of commercial banks and non-bank financial institutions (NBFIs) to rural areas, women-headed enterprises and green enterprises.
The programme is a three-component one: challenge fund, credit guarantee fund and policy component and is funded by Ukaid. It will be implemented by Nathan Associates (London) and Oxford Policy Management. Bangladesh Bank is the implementing agency and BFID is the executing agency.    
The programme targets generating 33,000 additional jobs by catalysing Euro 95 million in loans from commercial banks to new micro and small enterprise borrowers the number of which will be 19,000.   
The central bank chief said Bangladesh is far ahead of its neighbours in financial inclusion movement, on global financial inclusion index of the World Bank it ranks 'second' in South Asia.
He expressed the hope that Bangladesh will soon be the No. 1 in financial inclusion in South Asia.
Citing examples of various initiatives of financial inclusion, he said students' savings programme gives the banks stable liquidity base as they can secure money for long term.
"The beauty of financial inclusion is it gives a diversified and stronger base of deposits that help you come out of any kind of liquidity crunch in addition to diversified loan portfolio," Dr Rahman said.   
He noted that poor people are by "innovative by nature and they can do miracles" if policy and financial support is provided.
He said the SME sector of Bangladesh is mainly private-led and various layers of the sector have to be unlocked.
He identified institution building as the most challenging because of the mindset of the stakeholders.
He said Bangladeshi economy is private sector-led where market plays a significant role.
"Market alone cannot go far without adequate policy and regulatory support so that the market can operate on a stronger institutional footing," he said.
    msshova@gmail.com