Economics SME Financing.anik Ahuiouiomed

8/13/2019 Economics SME Financing.anik Ahuiouiomed

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SME Financing: present status &

Contribution to our Economy.

PREPARING AN ANAL!ICAL"#ER#IE$S "F SME FI NANCING

%ASE "N %ANGLAES' %AN(.

27 th February , 2011

Prepared by,

Ani) A*me+

BBA, 3rd Batch.

Department Of Finance

Jagannath University, Dhaka .

► Anik Ahmed, SME Financing, BBA,3rd Batch, Dept of

Finance,JNU.

RECENTMONETARYPOLICY- Declaredby BANGLADESH

BANKReasons Conse!"ences

#$%%

&a'anna() *n+,ers+(y.#.#$%%



SME Financing: present status &

Contribution to our Economy.

SME , Sma-- an+ Me+ium Enterprises :

SME business is a non-public limited companies but a business for self-employment or for social

welfare.>According to the latest circular of BANGLADESH BANK (Date – 26/!/2"#$ the definition

of S%all & 'ediu% Enterrise sector is gi)en *elo+,

►Sma-- Enterprises – S%all enterrises refer to those enterrises +hich are not an- .u*licLi%ited o%anies and +hich fulfill the follo+ing criteria0

/.Ser0ice Concern0 Ha)ing an in)est%ent of 13 !$ to 13 !$ $ e4cluding land &*uilding and / or e%lo-ing u to 2! +orers31.%usiness Concern 0 Ha)ing an in)est%ent of 13 !$ to 13 !$ $ e4cluding land &*uilding and / or e%lo-ing u to 2! +orers32.Manu3acturing Concern - Having an investment of Tk. 50000 to Tk. !5000000 e"cluding

land # building and $ or employing up to 50 workers.

►Me+ium Enterprises – 'ediu% enterrises refer to those enterrises +hich are not an-.u*lic Li%ited o%anies and +hich fulfill the follo+ing criteria0

/.Ser0ice Concern0 Ha)ing an in)est%ent of 13 !$$ to 13 5$$$ e4cluding land& *uilding and / or e%lo-ing u to ! +orers31.%usiness Concern 0 Ha)ing an in)est%ent of 13 !$$ to 13 5$$$ e4cludingland & *uilding and / or e%lo-ing u to ! +orers32.Manu3acturing Concern 0 Ha)ing an in)est%ent of 13 5$!$$ to 13 2$$$e4cluding land & *uilding and / or e%lo-ing u to 5! +orers3

Partition o3 SME Enterprises: S'Es in Bangladesh are also defined for uroses of industrialolicies *- 'inistr- of ndustries ('7#3 Historicall-$ this definition has *een in ter%s of fi4edin)est%ent *racets$ and a dual %ode definition is in lace$ searate for %anufacturingesta*lish%ents$ and ser)ice esta*lish%ents3

8According to the ndustrial olic- 2!$ s%all and %ediu% enterrises shall *e categori9edusingthe follo+ing definitions,


Finance,JNU.



,

□ Manu3acturing enterprise:

Sma-- Enterprises an enterrise should *e treated as s%all if$ in current %aret rices$ therelace%ent cost of lant$ %achiner- and other arts / co%onents$ fi4tures$ suort utilit-$ andassociated technical ser)ices *- +a- of caitali9ed costs (of turn e- consultanc- ser)ices$ fore4a%le#$ etc$ e4cluding land and *uilding$ +ere to *e u to t3 5! %illion:

Me+ium enterprise 0 an enterrise +ould *e treated as %ediu% if$ in current %aret

rices$ the relace%ent cost of lant$ %achiner- and other arts / co%onents$ fi4tures$suort utilit-$ and associated technical ser)ices *- +a- of caitali9ed costs (such as turne- consultanc- ser)ices#$ etc$ e4cluding land and *uilding$ +ere to *e u to t3 5%illion:

□Non4manu3acturing enterprise:Sma-- enterprise 5 an enterrise should *e treated as s%all if it has less than 2! +orers$ in full ti%e e;ui)alents:

Me+ium enterprise 0 an enterrise +ould *e treated as %ediu% if it has *et+een 2! and 5 e%lo-ees3

%rie3 "0er0ie6 "3 SME Financing:

1here is a great interest in s%all and %ediu% enterrises (S'E# as a %a<or lan of o)ert-reduction in Bangladesh3 1he go)ern%ent has for%ulated a co%rehensi)e industrial olic-1778 *- utting secial e%hasis for de)eloing S'Es as a thrust sector for *alanced andsustaina*le industrial de)elo%ent in the countr- to hel deal +ith the challenges of free 'aretecono%- and glo*ali9ation3

So%e data +ith a national scoe that are ertinent to characteri9ing S'Es in Bangladeshas of 177/417723 1here are so%e ="$>> ri)ate sector esta*lish%ents of )arious si9es inBangladesh +ith so%e ?3! %illion +orers e%lo-ed in the%3

Current Status o3 SME Financing by %an)s in %ang-a+es*:


Finance,JNU.



%% Sets SME Financing !arget at t) 918b 3or 17//:,A Co--ecte+ ne6s about SME -oan 3rom Financia- Epress

1he central *an has set the target for dis*urse%ent of loans at o)er 1 918 billion for the s%all

and %ediu% enterrise (S'E# sector in calendar -ear$ 255$ %aring a 6> 3!6 er cent increase

o)er that of the re)ious -ear3

1he *ans and financial institutions initiall- set the target at 1 2> *illion in 253 But the S'E

financing target +as later re)ised u+ard for the -ear 0 to 1 ?" *illion to %eet the gro+ing

de%and for such credits3

Sr -

no!ypes o3 %an)s name Estimate+

53 7+ned co%%ercial *ans and financial

institutions

1 5?>3@@ *illion

2 ri)ate co%%ercial *ans 1 >!53=6 *illion

? foreign co%%ercial *ans 1 5!3@? *illion

> countr-s non0*aning financial institutions 1 2236! *illion

1otal,

SME sectors: Besides$ 1he loans +ill *e gi)en to %ore than 6 categories of oerations in

the S'E sector such as0

● light engineering

● handicraft$

● flo+er$

● fish rocessing$

● handloo%$ rice0%ill

● a%dani$ Ca<shahi sil$

Ban of S%all ndustries and o%%erce Bangladesh Ltd3 (BAS# is entrusted +ith the

resonsi*ilit- of ro)iding %ediu% and long0ter% loans for ro%otion and de)elo%ent of

s%all0scale industries3 1he %e%orandu% and Articles of Association of the *an stiulates that

! of loana*le funds shall *e used for financing s%all scale and cottage industries3 1he


Finance,JNU.



outstanding credit of BAS stood at !)/8;.< crore at the end of Dece%*er 25 for s%all and

cottage industries sector that rose to !)/=;.= crore *- /1.>9? at the end of Dece%*er 223

Comments o3 Ana-ysts: ►"We've already taken a three-tier monitoring arrangement to

ensure growth of the SME sector in the country," the BB official said$ adding that the central

*an has ad)ised the *ans and financial institutions to in)est their funds on a cluster *asis$along +ith an area0aroach %ethod3

►nder the %onitoring arrange%ent$ the head office of the central *an$ its nine *ranch offices

across the countr- and head offices of all co%%ercial *ans +ill regularl- re)ie+ the

i%le%entation of S'E credit rogra%%ers3

►"We've put emphasis on cluster and area-approach methods for disbursement of such loans

with the aim of easing inflationary pressures on the economy through creation of obs across the

country," the BB official noted3

►“Developing countries like China are getting 20 to 30 per cent of their GDP from SMEswhereas this sector in angla!esh is contri"uting 20 per cent to GDP with #0 per cent of total

la"our emplo$e!%& Mr Aftab sa+d/

SME: !*rust sector +eser0es appropriate support:

S'E has *een considered as the thrust sector in the econo%ic de)elo%ent of the countr- +ith gro+ing

i%ortance fro% all +als of life3 t is e)ident that$ su*stantial increase in S'E and Cetail redit

ortfolios along +ith co%%ercial$ cororate and institutional lending$ +ould lead the *ans to its higher

tra<ector- of gro+th$ %ini%i9ing the ris of lending through ortfolio di)ersification3 As such$ %ost of the

*ans ha)e taen u aggressi)e %areting olic- to aug%ent their e4osure in S'E and Cetail redit3

1hough S'E concet is nothing ne+$ as e)ident fro% the esta*lish%ent of Bangladesh S%all and ottagendustries ororation (BS#$ *ut a fresh loo into and Endea)our to *oosting the sector are still

i%erati)e3 Bangladesh Ban re0finance sche%e for S'E is lauda*le3 1he role of F0SEDF for creating

a+areness a%ong the entrereneurs and *ans/NBFs to *e %ore focused in S'E deser)e areciation3

Prspects!n0e%lo-%ent ro*le% is a gro+ing concern all o)er the +orld %ore articularl- in de)eloing

countries$ and the anacea to the set*ac %ostl- lies in %assi)e de)elo%ent of la*or incenti)e S'E

sector3 S'E in %an- cases can *e set u at do%estic and household le)el contri*uting to cost cutting3

Fa%il- %e%*ers %a- also articiate in the rocess/

►!*e go0ernment is consi+ering a specia- pac)age 3or t*e SME sector:Deter%ining the econo%- gro+th go)ern%ent initiating to de)elo S'E 3 1he go)ern%ent considers afurther cut in *an interest rates$ eseciall- for s%all and %ediu% enterrises (S'Es# to hel the sectorgro+ faster$ said the co%%erce %inister -esterda-3 e ha)e alread- *rought do+n the interest rate tosuort the countr-s entrereneurs3 e are considering reducing the rate further to hel different sectors$


Finance,JNU.

http://gurumia.com/2009/05/24/the-government-is-considering-a-special-package-for-the-sme-sector/

http://gurumia.com/2009/05/24/the-government-is-considering-a-special-package-for-the-sme-sector/



eseciall- the S'Es$ gro+ faster$ said Faru Khan3 No+ Anal-sis S'E loans through a grah *ased on25 fiscal olic-3

n the first nine %onths of this -ear$ the *aning sector e4ceeded the +hole -ears target for gi)ing loansto s%all and %ediu% enterrises (S'E# 00 *ut onl- thans to a ne+ definition of S'E loan$ according toso%e *aners3 1he *aners said the definition included e4isting non0S'E ortfolios as S'E loans$heling raise dis*ursed funds to !a)a 2;1.;2 bi--ion (SI8.> bi--ion# against a target of !a)a 12<.<8

bi--ion3 f a trader *orro+s 1aa 5 %illion$ it can *e %entioned as %ediu% enterrise loan *ecause ofthe definition$J said an official +ith the S'E credit deart%ent of a ri)ate *an3 He said %an- *ans ha)e sho+n their loans u to 1aa /87 mi--ion as S'E credit$ +hich e4aggerated the dis*ursed figure3Bangladesh Ban data sho+s less than !a)a /87 *illion +as lent to the S'Es in 177<

SME From t*e speec* o3 %u+get 17/74//:

%183]. &onsidering t'e SME sector as one of t'e main agenda of economic development for t'e first timein (0!0 we 'ave fi"ed a target of Tk. ()**5 crore as SME loan to be disbursed by t'e banks and

financial +nstitutions. T'e banks and financial institutions will distribute loans to t'e SMEs and womenentrepreneurs in accordance wit' t'e ascertained target.

[184]. ,nder t'e SME e-financing Sc'eme/ managed by anglades' ank an amount of Tk.!51!

crore 'as been refinanced from t'ree funds up to 2pril (0!0 to various banking and nonbanking financialinstitutions. T'e beneficiary coverage of t'is sc'eme is !534( SMEs.

[185]. +n order to create an euitable and well-organi6ed development of t'e industrial sector a directive

'as been issued to establis' a 7omen Entrepreneur 8edicated 8esk/ in eac' bank and financial

institution to ensure better opportunity for t'e women entrepreneurs to receive loans on

easier terms and conditions.

Contribution o3 SMEs in t*e Economy:

n )ie+ of resent econo%ic de)elo%ent effort in Bangladesh the S'E sector la-s an i%ortant role31hese are reflected in the follo+ing erfor%ance /acti)ities of this sector,► During the Fourth Fi)e -ear lan$ a total of 7.28 mi--ion <o*s +ere created against the targetof 7.> %illion3


Finance,JNU.

http://www.asianewsnet.net/home/searchresult.php?sec=2&keysh=loan

http://www.asianewsnet.net/home/searchresult.php?sec=2&keysh=SME








http://www.asianewsnet.net/home/searchresult.php?sec=2&keysh=banks





http://gurumia.com/2010/12/02/sme-sectors-contribution-to-gdp-double-prospect/small-and-medium-enterprises-sme-loan/










http://www.asianewsnet.net/home/searchresult.php?sec=2&keysh=banks






► ontri*ution of S'E sector to GD. re%ained a*o)e >.8? during the eriod fro%205 to2>02! desite decline in the a%ount of ad)ances *- the *aningsector to this sector3► S'E sector e%lo-s 18? of the total la*our force3 As a result$ this sector is the resenta)aila*le sector for creation <o*s3► S'E sector hel alle)iate o)ert-$ increase inco%e le)el of rural eole and ro%ote agro0

industrial linage in Bangladesh3► S'E sector re;uires lo+er energ- sul-$ lo+er infrastructure facilities and thissector i%oses less en)iron%ental ris3 1he- contri*ute to+ards *etter utili9ation of local resources andsills that %ight other+ise re%ain unutili9ed3► S%all industries *eing la*our oriented are caa*le of generating %ore e%lo-%ent3► 1he- are necessar- to %aintain and retain traditional sills and handicrafts3► 1he- are the onl- %ediu% for di)ersification of rural econo%- and for eaceful andconcurrent socio0econo%ic de)elo%ent of all classes of eole3 Fro% the a*o)e discussion$ +e can sa-that S'Es are la-ing an i%ortant role in our econo%- in )arious +a-s3

Conc-usion:At last +e can sa-$ S'E financing la-s a contri*ution in Bangladeshi econo%-3 t is a *usiness +hichchanges the traditional *usiness successful to %ae e%lo-%ent fro% une%lo-%ent3 1he i%ortance ofS'E sector is +ell0recogni9ed +orld o)er o+ing to its significant contri*ution in achie)ing )arioussocio0econo%ic o*<ecti)es$ such as e%lo-%ent generation$ contri*ution to national outut and e4orts$fostering ne+ entrereneurshi and to ro)ide deth to the industrial *ase of the econo%-3 Bangladeshhas a )i*rant S'E sector that la-s an i%ortant role in sustaining econo%ic gro+th$ increasing trade$generating e%lo-%ent and creating ne+ entrereneurshi in our countr-3

3


Finance,JNU.

Economics SME Financing.anik Ahuiouiomed

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