SME loans have remained relatively stable because they are typically smaller in size and repaid through manageable instalments.
"Despite the current economic pressures, the SME loan portfolio has remained relatively stable," said Ahsan Zaman Chowdhury, Managing Director and CEO of Trust Bank PLC., and General Secretary of Association of Bankers, Bangladesh (ABB).
SME financing is spread across thousands of entrepreneurs, which helps diversify risk. Although monitoring and follow-up are more complex, the diversified nature of the portfolio reduces concentration risk, Mr. Chowdhury said in an interview with the FE.
"In this context, banks must act not only as lenders but also as development partners. Through working capital support, cash-flow management and entrepreneurial capacity building, the sector can be sustained and strengthened," he added.
Trust Bank offers a wide range of SME financing solutions, including working capital and term loans, trade finance facilities such as L/Cs and LTRs, bank guarantees and distributor financing.
"We have specialised programmes such as Trust Nandini for women entrepreneurs, Trust Suchana for partially secured financing, Trust Sompod for mess rent-based businesses and Trust Prantik for low-income borrowers," he said.
Innovative startup entrepreneurs are also supported through concessional financing at a 4.0 per cent interest rate.
In addition, the bank leverages Bangladesh Bank refinancing schemes and SME Foundation funds. It has recently strengthened its linkage with microfinance institutions (MFIs) and entered into a credit enhancement partnership with PKSF to expand access to finance for grassroots entrepreneurs.
The MSME sector is one of the most important pillars of Bangladesh's economy. It contributes around 25-30 per cent of the country's GDP, while approximately 85 per cent of industrial-sector employment is generated by small and medium enterprises.
According to the latest Economic Census, Bangladesh has around 11.8 million small economic units employing approximately 30.8 million people.
"This sector not only drives economic growth but also plays a vital role in energising the rural economy, reducing poverty and creating opportunities for women and youth entrepreneurs. Therefore, the continued expansion of the MSME sector is critically important for Bangladesh's sustainable economic development," he said.
On access to finance, Mr. Chowdhury said the primary barriers include collateral requirements, complex documentation and lengthy approval processes.
"To address these challenges, Bangladesh Bank's Credit Guarantee Scheme (CGS) serves as an effective alternative to traditional collateral by reducing lending risks and facilitating faster loan disbursement. At the same time, initiatives to expand digital KYC and alternative credit-scoring methods are helping improve access to finance," he said.
Trust Bank has already introduced unsecured distributor loans of up to Tk 10 million and a partially secured loan scheme, Trust Suchana, offering financing of up to Tk 5.0 million.
For priority entrepreneur groups, women entrepreneurs can access refinance facilities of up to Tk 5.0 million without collateral, while young and rural entrepreneurs are provided with special refinance facilities and easy-term loans based on innovative business ideas.
Mr. Chowdhury said digital technology has made SME financing faster, simpler and more accessible.
"Trust Bank has already launched its mobile banking app, Trust Money, internet banking services, e-KYC and online loan application systems. We are also introducing AI- and machine learning-based credit scoring, digital monitoring and fintech integration. These initiatives will expand collateral-free lending opportunities and strengthen financial inclusion," he said.
Trust Bank is also actively implementing Bangladesh Bank's refinancing and pre-financing packages at the grassroots level.
"Our specialised SME Desk at the head office provides comprehensive guidance to our nationwide branch network on refinancing and pre-financing processes, ensuring swift and efficient client service," he said.
"Currently, we are operating several important schemes, most notably the Tk 250 billion CMSME scheme".
"we are also participating in a Tk 30 billion fund for women entrepreneurs, a Tk 7.5 billion marginal loan facility for farmers and micro-professionals, and a Startup Refinance facility offering financing at just 4.0 per cent interest for trained young entrepreneurs with innovative ideas. Alongside these initiatives".
The CEO said the Trust Bank PLC is among the few banks providing credit support under the SME Foundation's special fund.
Looking ahead, Mr. Chowdhury said the major opportunities for the CMSME sector over the next five years will stem from digital transformation, rural economic growth, the increasing participation of women and youth entrepreneurs, and the expansion of green finance.
However, he cautioned that challenges such as inadequate documentation, the lack of acceptable collateral, high borrowing costs, limited market access and global economic uncertainty will continue to affect the sector.
"To address these challenges, we must move towards cash-flow-based lending and digital credit-scoring models. Expanding the Credit Guarantee Scheme and strengthening cluster-based development initiatives are also essential. Only through coordinated efforts by the government, regulators and financial institutions can the CMSME sector emerge as the true engine of Bangladesh's economy," he said.
jasimharoon@yahoo.com