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SMEs, the lifeblood of the economy

Article - May 23, 2013
Under the leadership of Governor Dr Atiur Rahman, Bangladesh’s Central Bank (Bangladesh Bank) has sharpened its focus on small and medium-sized enterprises (SMEs) over the past three years to a level unmatched by any other central bank in the world.
Some 90 per cent of private-sector businesses in Bangladesh are classified as SMEs. As such, they represent a vital source of national revenue and are at the heart of the nation’s socio-economic development. Around 70-80% of the non-agricultural workforce in Bangladesh works in the SME sector. SMEs contributed up to 25% of Bangladesh’s GDP last year, including around 40% of gross manufacturing output and approximately 25% of the total labour force.

In a speech he delivered at the Pan Pacific Sonargaon Hotel in Dhaka at the end of April, Central Bank Governor Dr Atiur Rahman highlighted the many efforts being made to bolster the SME sector in Bangladesh.

Among the main points he made, Dr Rahman stated: “Bangladesh Bank, along with other relevant ministries, and stakeholders of financial sector have been working relentlessly for the development of SME sector. The establishment of separate SME & Special Program Department in Bangladesh Bank and the service provided through this department for further development of the SME sector is an evidence of our special efforts. Moreover, as the Central Bank, we have taken a number of innovative initiatives to promote SME lending. Within the SME credit policy released in 2010 for guiding the commercial banks to be involved in SME financing, a number of initiatives have been taken, such as: banks need to establish “Dedicated Desks” in branches for SMEs and ‘SME Service Centres’. Bangladesh Bank now gives targets for the banks to ensure SME credit disbursements and an emphasis on providing loan to small entrepreneurs and women entrepreneurs.

“Banks in Bangladesh are being supported in SME financing initiatives with refinance line from Bangladesh Bank, which is being funded by Bangladesh Bank, Government of Bangladesh and development partners like IDA, ADB and JICA. Under refinance scheme, Bangladesh Bank has already provided 23.97 billion taka (as of July 2012) to different banks and NBFIs at subsidised interest rate. 15% of this fund (Taka 4.00 billion) is earmarked for women entrepreneurs.

“Bangladesh Bank and IFC undertook two key projects for SME sector development. Of these two, the SME Market Segmentation Database is first of its kind in South Asia. Under this initiative, information on SME sector will be generated and will be made available for all stakeholders of SME development. This work is in progress and soon we will reap benefits out of it.

“Bangladesh bank has also issued directives to commercial banks for using the cluster approach for better targeting the SME sector. It is also worthwhile to mention that Bangladesh Bank is currently doing in a research to find out the impact of the SME financing activities undertaken by the commercial banks in Bangladesh. We are indeed highly committed to developing a sustainable SME sector in Bangladesh.”