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Trading eats up bulk of SME refinancing fund
12/26/2005
Trade financing has gobbled up three-fourth of Tk 1.54 billion disbursed under the Bangladesh Bank's (BB's) SME refinancing scheme. This will hinder the aim of promoting real economic growth, according to experts, reports BDNEWS.
"The aim of the refinancing will be completely lost if the lion's share goes to the trading sector," Zaid Bakht, Research Director of the Bangladesh Institute of Development Studies (BIDS), told the news agency.
Under the scheme, banks and non-banking financial institutions (NBFIs) eligible for availing the refinancing, disbursed 78 percent to trading enterprises, 14 percent to the industrial sector and 8 percent to the service sector out of the total of Tk 1.54 billion.
Referring to the SMEs entrepreneurs' hassles in getting financing from banks, Bakht said the fund was formed to secure financing to the SMEs so that it could act as an alternative of collaterals and help growth of the sector.
"Banks are always lending to the traders from their own funds. There is no necessity to finance them under the scheme," he said.
Bakht said the refinancing should be made to the enterprises engaged in production of goods and services. "The BB should completely elaborate that the fund is not for the trading sector."
The government, earlier, recognised the SMEs role in promoting industrial growth, employment creation and poverty alleviation. To help in its growth, government prioritised it in the Industrial Policy and introduced the scheme managed by the BB in July 2004 with a total fund of Tk 1.6 billion.
Of the amount, Tk 600 million was provided by the World Bank under IDA (International Development Assistance) credit.
Official sources said that BB had refinanced Tk 1.54 billion to various banks and non-banking financial institutions (NBFIs) out of the total Tk 1.6 billion from September 2004 to September 2005.
Seven banks and nine NBFIs were refinanced from the BB fund, while four banks and two NBFIs got refinancing from the IDA credit fund.
The BRAC Bank Ltd, the National Credit and Commerce Bank Ltd (NCCBL), the Southeast Bank Ltd availed refinancing from both the fund.
The BRAC Bank that received 39.05 percent of the total refinancing and disbursed 84.30 percent to the trading enterprises while its lending to industries accounted for 15 percent.
Admitting the matter, a BRAC Bank official said that the most of the borrowers coming to the bank are small traders. "They sought loans ranging from Tk 0.2 million to Tk 0.5 million," he said.
"But we are considering to launch loan packages for agriculture and industrial sectors," he said.
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