Success is subject to execution

A big financing programme aimed at small businesses could unlock a long-neglected segment of the economy. But success will depend on institutions venturing into unfamiliar or neglected territory.
For years, micro or small or medium scale entrepreneurs across the country have encountered a familiar obstacle when seeking finance: a lack of access to affordable credits.
Whether running a small engineering workshop in Bogura, a software start-up in Dhaka or a Khadi clothing enterprise in Cumilla, many business owners face the same response from banks -- return with stronger balance sheets, collateral and a proven credit history.
For countless small and medium-sized enterprises (SMEs), those requirements are difficult, if not impossible, to meet.
The consequences have been felt across the economy. Expansion plans are delayed, investment decisions postponed and promising ventures forced to rely on costly informal borrowing. Many businesses with the potential to generate jobs and drive innovation simply remain too small to grow or embrace premature death.
The government now hopes to change that destiny of businesses of smaller scales.
The government and Bangladesh Bank together have unveiled a Tk 77-billion financing package aimed at supporting SMEs, cottage, micro, small and medium enterprises (CMSMEs), start-ups and innovative businesses -- sectors long underserved by the formal financial system.
The funding package consists of multiple components.
Bangladesh Bank has earmarked Tk 50 billion under a stimulus programme to support struggling CMSMEs through the banking system with the government expected to subsidise part of the interest cost.
The budget has allocated Tk 20 billon to three state-backed institutions -- SME Foundation (SMEF), Bangladesh Infrastructure Finance Fund Limited (BIFFL) and Infrastructure Development Company Limited (IDCOL) - to establish a dedicated refinancing facility.
In addition, Tk 5.0 billion has been allocated for start-ups and Tk 2.0 billion for financing the country's emerging creative and innovation economy.
The initiative potentially represents one of the most significant efforts never seen in the past to address a longstanding financing gap within the country's private sector.
Yet, while the programme offers considerable promise, it also raises important questions about institutional capacity, implementation risks and whether the country can avoid repeating mistakes that have undermined previous credit schemes.
A new approach to an old problem: Bangladesh's banking sector has traditionally favoured large corporate borrowers, not SMEs as like as Dalits. Faced with rising non-performing loans, weak recovery rates and regulatory pressures, many banks have become increasingly cautious about lending to smaller businesses.
Officials view the programme as part of a broader effort to stimulate private-sector investment, create employment opportunities and diversify the economy at a time when businesses continue to face elevated borrowing costs, tight liquidity conditions and subdued investment sentiment.
If implemented effectively by proper deregulations, the facility could enable thousands of enterprises to expand operations, improve productivity and create jobs.
The impact could be particularly significant outside major urban centres, where access to formal financing is often even more limited.
Unfamiliar territory: Perhaps the most striking aspect of the initiative is the choice of institutions tasked with administering Tk 20-billion programme.
Neither IDCOL nor BIFFL was originally established to serve the SME sector.
Over the past two decades, IDCOL has built a reputation as one of Bangladesh's leading development-finance institutions, focusing primarily on renewable energy, climate finance and infrastructure projects. Its solar-home-system programme gained international recognition as one of the world's largest off-grid renewable energy initiatives.
BIFFL, meanwhile, was created to finance large-scale infrastructure and industrial-development projects. Although its activities have expanded in recent years to include financing energy-efficient machinery for export-oriented industries, SME lending remains outside its traditional area of expertise.
Only the SME Foundation has a direct mandate to support small enterprises. Even then, its operations have historically been modest in scale.
Established with a fund of roughly Tk2.0 billion, the organisation has focused largely on entrepreneurship development, training programmes and limited financing support rather than managing large-scale credit facilities.
The new refinancing scheme, therefore, represents a major departure for all three institutions.
"The fund is something these institutions never imagined receiving," says one finance ministry official.
That novelty creates both opportunities and challenges.
Still designing the blueprint: Interviews with officials at the three institutions suggest that implementation planning remains at an early stage.
Executives at IDCOL, BIFFL and SME Foundation say detailed operational strategies have yet to be finalised, partly because the budget is still awaiting parliamentary approval.
Key questions remain unanswered.
How will borrowers be selected? What sectors will receive priority? What risk-sharing arrangements will be adopted? How will monitoring and recovery systems operate?
Officials say these issues are expected to be discussed at upcoming board meetings, where lending criteria, distribution mechanisms and governance structures will be developed.
The absence of a ready-made blueprint is not unusual for a newly announced programme. Nevertheless, it highlights the substantial preparatory work required before funds can begin reaching businesses.
Building an effective refinancing architecture requires more than simply allocating money. It requires credit-assessment systems, monitoring frameworks, borrower-screening mechanisms and institutional expertise - capabilities that may take time to develop.
Diversifying the economy: The programme also reflects broader ambitions within economic policymaking.
For decades, the country's export success has been overwhelmingly concentrated in the ready-made garment sector. While garments remain the backbone of export earnings, policymakers increasingly recognise the need to diversify into higher-value industries capable of sustaining growth in a changing global economy.
Technology-based enterprises, light-engineering firms, agro-processing businesses and innovative service providers are widely viewed as potential engines of future growth.
By directing financing towards innovative and technology-oriented enterprises under Tk 7.0-billion programme, the government hopes to encourage investment in industries never nursed and could reshape the country's economic structure over the coming decade.
In fact it is an attempt to nurture the next generation of Bangladeshi businesses.
Lessons from earlier programmes: History, however, offers reasons for caution. Bangladesh has launched numerous refinancing and subsidised credit programmes over the years, with mixed outcomes, on multiple sectors, excepting the SMEs.
Some have successfully expanded access to finance. Others have been undermined by weak oversight, inadequate borrower selection and poor loan recovery.
Bankers frequently warn about what they describe as "opportunity hunters" -- borrowers who exploit concessional financing schemes without genuine investment intentions. Such practices have contributed to loan defaults, weakened financial discipline and reduced confidence in targeted lending programmes.
Yet the challenge remains formidable.
Ensuring that funds reach productive entrepreneurs rather than politically connected or opportunistic borrowers may ultimately determine whether the programme succeeds or fails.
The long road ahead: Even supporters of the initiative acknowledge that fully deploying the Tk77-billion facility will take time. Operational frameworks must be developed. Regulatory approvals secured. Staff trained. Eligible borrowers identified.
Meaningful disbursements may, therefore, take months rather than weeks.
The ultimate measure of success will not be the size of the allocation announced in the budget. Rather, it will be whether the programme succeeds in reaching entrepreneurs who have historically been excluded from formal finance and whether it can support sustainable business growth without creating a new generation of distressed loans.
For now, the total Tk 77-billion package represents an ambitious attempt to tackle one of the country's most persistent economic challenges.
The opportunity is significant.
So are the risks.

jasimharoon@yahoo.com