The central bank refutes the Asian Development Bank (ADB) survey finding that growth of small and medium enterprises (SME) in Bangladesh has slowed down for funding constraints, asserting that this priority sector of the economy is expanding.
In a country diagnostic study titled 'Bangladesh consolidating export-led growth, transforming into a thriving middle income economy', the ADB observed that limited access to finance curbs SME growth and cuts back on this sector's job-and income- creation potential.
"Recently SME is considered a priority sector of Bangladesh and the sector is expanding. So, Bangladesh Bank may differ with the statement of the ADB," the BB said in a letter to the bank and financial institutions division (BFID) to refute the ADB view.
The Bangladesh Bank statistics show country's SME lending on the increase every year with loans and grants from the Japan International Cooperation Agency (JICA), the ADB, and the World Bank's International Development Association (IDA).
In 2015, some Tk 1.15 trillion was disbursed as SME loan, up from Tk 1.0 trillion in 2014 and Tk 83.23 billion in 2013. The disbursement rates are 110 per cent, 113 per cent, and 115 per cent respectively of annual targets.
The central bank data also show the trend in repayment of loans in SME sector also very well. In 2015, the total recovery of SME loans was Tk 1.07 trillion against Tk 1.6 trillion of recoverable loans. In 2014, the recovery was Tk 691 billion against Tk 941 billion worth of recoverable loans, and in 2013 the recovery was Tk 419 billion against Tk 542- billion recoverable loans.
Statistics also show that various refinancing schemes were taken in the past for SME- sector development in the country.
The JICA provided 5.0 billion Japanese Yen for a programme titled 'Financial Sector Development for SME'. The ADB gave US$30 million under SME sector development project. The ADB and the central bank had a joint SME Development project worth $95 million and the IDA gave some Tk 1.16 billion for Enterprise Growth and Bank Modernisation Programme (EGBMP) fund.
A senior official at the BFID told the FE most of these loans came to Bangladesh at very low rates of interest, ranging between 0.01 per cent and 1.0 per cent.
As a result, he said, the credits to the SME sector could be provided at low rates of interest, which is helping their growth.
The official said country's SME sector is now expanding by feeding on adequate funds made available.
Eminent economist and chairman of Agrani Bank Dr Zaid Bakht in a study titled 'Strategy for Development of the SME Sector in Bangladesh' said in line with the measures delineated in the 6th Five-Year Plan, lending to the SME sector has been geared up following Bangladesh Bank guidelines.
He said the volume of SME credits disbursed has increased significantly with visible positive impacts on the growth of the sector.
"However, one aspect on which little progress has been made is with regard to strengthening the targeting of SME credit," he said. A prerequisite for this is the creation of SME database, which would help assess the relative growth potential of diverse SMEs and enable proper targeting of SME credit.
Mr Bakht identified a 'lopsided feature' of the SME credits, particularly those under Bangladesh Bank's refinancing scheme, as the predominance of trade and other service activities as opposed to manufacturing amongst the credit recipients.
"Efforts need to be made, therefore, to enhance flow of credits to manufacturing SMEs," he said.
syful-islam@outlook.com
BB differs with ADB on SME growth ratings
Syful Islam | Published: July 10, 2016 00:00:00 | Updated: February 01, 2018 00:00:00
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