Thrust on credit access to SMEs

Bank and Financial Institutions Division Secretary Dr. M Aslam Alam Tuesday said the government is considering movable collateral reforms for ensuring credit access to small and medium enterprises.
"Almost 80 per cent of our businesses are SMEs and they generate about 40 per cent of total employment with the contribution of about 25 per cent to the GDP…..Despite the fact that SMEs have hardly access to credit from the banks and financial institutions due to banking sector's widespread practices of lending mostly against secured collateral," he said.
He was speaking at a seminar on "secured lending and movable collateral reforms in Bangladesh: promoting the use of movable collateral for greater access to credit."
World Bank Group organised the seminar at a city hotel. A good number of MDs, CEOs and top officials of banks and financial institutions attended the programme.
World Bank Group Senior Operations Officer Francesca Lo Re presented a keynote paper on how they could help the Bangladesh government to carry out reforms.
"We will use our experience to help carry out reforms and initiate movable collateral," she said.  
Alejandro Alvarez de la Campa, Murat Sultanov and Swati Sawhney of World Bank Group presented papers focusing on legal framework, prospect, risk and other aspects of movable collateral.
Dr. Alam said remarkable progress has been achieved in the field of private sector, especially in financial sector.
"Despite such progress, one cannot deny the fact that various problems still exist in the sector including non-performing bank loans and inadequacy of credit facilities for smaller business entities what we call SMEs," he said.
He said lenders in Bangladesh feel comfortable to lend with collateral of land, building and other immovable properties, SMEs and new business ventures get deprived of loans as they don't have enough immovable property.
"That practice seriously hinders their progress and potentials," he said, adding that this can be changed if the government can ensure a system of allowing bank loans against movable assets and collaterals such as company inventory, accounts receivables and other related items.
An idea of lending against movable assets seems to be a daunting task as it bears the risk of further loan defaults, he observed.
"But if we do nothing in fear of that risk, we would lose the opportunity for exploiting huge potentials of the economic activities and employment generation in the country."  
The secretary said legal reforms should be made to ensure transparency and accountability of all stakeholders in the whole process of credit delivery.
"No doubt it would be a challenging task, but we need to move forward in initiating the collateral legal framework in order to enable firms particularly SMEs to leverage the greatest part of their assets in obtaining credit," he added.
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