Bangladesh Bank

[The Central Bank of Bangladesh]

Increasing Access to Finance:

SME & Agriculture

Syed Nazrul Islam

Deputy Director & Project Manager
SMESPD, BB, H.O, Dhaka

Defining Access to Finance

Financial inclusion can be defined as a state in which all people of working
age have access to a full suite of quality financial services, provided at
affordable prices, in a convenient manner, and with dignity for the clients
(Accion International, 2009).
Financial inclusion encompasses the range, quality, and availability of
financial services to the underserved and the financially excluded (IFC, WBG2011)
Financial inclusion implies that both unbanked and under banked households
and firms are part of the target market.

Source: IFC, WBG2011

Access to Finance-Institutional
Dimension

Financial Access & Institutional

Dimensions

Source: World
Bank,2005

Defining Access to Finance-BD

Rahman (2009) defines financial inclusion in Bangladesh as access to financial services from officially regulated
and supervised entities banks and financial institutions are licensed by the
Bangladesh Bank,
MFIs by the Microcredit Regulatory Authority (MRA),
registered cooperatives by the Department of
Cooperatives;
and official entities themselves including post offices
and National Savings Directorate.

Measuring Access: Institutions,

Services/Products
Access to Institutions-Banks, MFIs, Insurance Companies
Access to Functions or Service-Payments, savings, credits
Access to use of specific financial products- Debit/Credit cards,
insurance
Some Important Statistics
Around 2.7 billion adultsalmost 70% of the population in
developing countrieshave no access to formal financial services
(IFC, WBG-2011);
Share of populations with accounts in formal and semi-formal FIs
( Demirg-Kunt et al, 2007) -

Western Europe and North America- More than 80%

Central Asia and Eastern Europe -60% to 80% percent
Latin America < 20% (Nicaragua )to >60%(Chile).
Asian countries- Ranges from 40% to 60%.

Measuring Access: In Bangladesh

Outreach
Dimension

Ref: Islam & Mamun, 2011WP1101 (BB)

Measuring Access: In Bangladesh

Actual Usage
Dimension

Ref: Islam & Mamun, 2011WP1101 (BB)

The number of loans per 100,000 people in Bangladesh, for example, is

54.73 and the number of deposits for 1,000 people is 228.75 placing it at
the 31st and 43rd spot respectively in a World Bank survey of 53
developed and developing countries (Beck, et al., 2006). Without the
spread of microfinance institutions, Bangladesh would have ranked
considerably worse.

Nature and factors affecting

FI

The financially excluded sections largely comprise

Marginal farmers
Landless laborers
Self employed and unorganized sector enterprises
Urban slum dwellers
Migrants
Ethnic minorities and socially excluded groups
Senior citizens
Women

Factors affecting access to financial services

Legal identity
Limited literacy
Level of income.
'Terms and conditions.
Complicated procedures
Psychological and cultural barriers
Place of living
Lack of awareness

Consequences of exclusion and

benefits of inclusion
Consequences Of Financial Exclusion

Losing opportunities to grow

Country's growth will retard
Business loss to banks
Exclusion from mainstream society
Loss of opportunities to thrift and borrow
Employment barriers

Benefits Of Inclusive Financial Growth

Growth with equity

Get rid of poverty
Financial Transactions Made Easy
Safe savings along with financial services
Inflating National Income
Becoming Global Player

Paradigm Shift

Access to Finance is shifting to

embrace the idea of providing
banking services
(credit, savings,
and insurance) rather than primarily
delivering microcredit for small scale
business.

BBs Initiatives-BRPD

Bank A/C for Farmers

Depositing Tk. 10
SCBs & Specialized Banks
96,37,145 Accounts (19/09/2013)
Bank A/C for Unemployed Youths
Depositing Tk. 50
Any scheduled Bank under National Service Program
Bank A/C for Hardcore Poor
Depositing Tk. 10
SCBs & Specialized Banks
Bank A/C for Freedom Fighters
Depositing Tk. 10
SCBs & Specialized Banks
1,14,211 Accounts (19/09/2013)
Bank A/C for Aila Affected People
Depositing Tk. 10
Kaira & Dakup Upazill Branches of Sonali, Agrani, Rupali & BKB.

BBs Initiative-BRPD

Bank A/C for Beneficiaries under Social Security Programs

Depositing Tk. 10
SCBs & Specialized Banks
26,92,409 Accounts (19/09/2013)

Bank A/C for Small Insurance Policy Holders

Depositing Tk. 100

SCBs & Specialized Banks
9,402 Accounts (19/09/2013)

Mobile Phone Banking

Inward foreign remittance disbursement

Cash in /out using m-wallet account through agents/ Bank branches/ ATMs/
Mobile Operators outlet
Person to Business Payment (e.g. utility bill payment)
Business to person Payment (e.g. salary disbursement )
Government to Person Payment
Total no. of customers under mobile banking: 1,02,35,000 [ As on 11/11/2013]

School Banking

BBs Initiative-ACFID
Banks were instructed, from FY 20112012, mandatorily to set
annual agri./rural credit disbursement target at a 2.5% of their
total loans and advances

Loans to Farmers for Spice Cultivation

Production of Pulse, Oil-seed, Spices and Maize
4% interest rate concessional credit

BBs Initiative

SME & Special Programs

Department

Bangladesh SME sector-A Brief

Goals and Objectives of SMESPD

Goals
Achieving
enhanced
economic
growth;
women
empowerment; poverty alleviation and realizing the full
potential of SME sector in development;

Objectives

Bringing SME banking under prudential regulation

Ensure proper use of SME loan through strong monitoring
and control;

Enhancing access to finance for the marginal, small and

financially excluded women entrepreneurs there by
broadening Financial Inclusion among the formal and non
formal entrepreneurs;

Supporting banks/Non Bank Financial Institutions in SME

Banking capacity building ; and

Functions of the department

Regulation of SME banking activities of the
banking sector;
Policy related issues on SME banking;
Monitoring of industrial loan ;
Managing refinance schemes for SMEs;
BB
ADB
JICA
Women entrepreneurs development;
Monitoring of SME lending in the banking
sector;
Refinance scheme for agro based industries;
Affordable housing financing
Others

BBs initiatives for SME sector

development
There has been a paradigm shift in the
Bangladesh Banks policy regime in recent
years.
The policy has skewed in favor of the
financially excluded and unbanked mass
of the country specially towards the
SME entrepreneurs with particular emphasis given
to small entrepreneurs and women entrepreneurs
More emphasis on manufacturing and service
sector that are more capable of generating
employment equitable and enhanced economic
development; and
Traditionally developed industry clusters.

BB strategies for SME development

Bangladesh
policy and
number of
taken:

Bank has issued SME credit

programs where following a
new measures have been

Targeted Credit Initiative(TCI)

Cluster Based Lending(CBL)
Women
Entrepreneurship
Development(WED)
Promotion of SME issues
Training [for bankers and entrepreneurs]
Incentives for bankers
Hand Holding with other stakeholders

Our approach

Financial Inclusion-Broadening SMES

Definition of SMEs [SMESPD Circular #01/2011]
Criteria
Size

Fixed Asset excluding land and Building

# of Manpower employed
(million BDT)
Manufacturin Servic
Manufacturing Service
Trade
Trade
g
e

Cottage

< 0.5

10 [including family members]

Micro

> 0.5 - 5.0

Small

>
5.0100.00

> 0.50 -
10.0

> 0.50
10.00

Medium

>100.00300.00

>10.00-
150.00

>10.00150.00

< 0.50

< 0.50
-

10-24

< 10

< 10

25- 99

10-25

10-25

100-250

26100

26-100

Cottage & Micro Industries are also included in

SME financing[ even eligible for Refinance from
BB]

Refinance Window
Name of
Fund

BB Fund
(SE & WE)
IDA

Allocation
(BDT in
Crore)

600

202

(SMEs outside
Dhaka & Ctg)

ADB-2

720

(SMEs outside
Dhaka & Ctg)
(MT & LT)

450

Refinance (BDT in Crore)

Number of
Ent

Amount

General

12682

1219.94

WE

8639

664.25

Subtotal

21321

1884.19

3160

312.61

General

3134

318.49

WE

130

16.45

Subtotal

3264

334.94

General

12338

645.17

WE

293

27.23

Subtotal

12631

672.40

144

119.77

118

ADB-1

JICA

Category

Gross Total 40520

3323.91

Cluster Based Lending (CBL)

cluster is a geographic concentration of interconnected
businesses, suppliers, and associated institutions in a
particular field.
Clusters are considered to increase the productivity with
which companies can compete, nationally and globally.
Benefits of Clusters
increasing productivity,
driving innovation, and
building new business
Bangladesh Bank, SMESPD has so far identified
more than 100 clusters around the country. We
have assigned individual banks to each of the
clusters
Cluster based targets are also taken
Active support is being given to banks in
financing on a cluster based approach

Women Entrepreneurship
Development
Women entrepreneurship development
(WED) initiatives
15% of all refinance window to be specified
for WE
A 10% target for WE lending of total SME
Interest rate cap for WE loan
under BB
refinance Window
(bank rate + 5%);
currently bank rate is 5%
WE loan application to be given priority
WE facilities provided by banks to be
broadcasted in mass media
Group based lending allowed to WE
Up to Tk. 2.5 million clean exposure limit for
WE [without any collateral].
WE dedicated help desk to be opened by the
banks & FIs

Graph-1:Total disbursement

Graph-2: Disbursement to women

Entrepreneurs

Broadening FI & SMESPD

Creation of a new department for focused and comprehensively
addressing the need for increasing financial inclusion of small and
women entrepreneurs.
Targeted SME lending program for the first time
Inclusion of all the banks and FIs in the SME lending program.
Special emphasis on small enterprise (40% of SM E portfolio to be
SEs)
Refinance window at bank rate for the SMEs
SME help desk in banks and financial institutions to provide
information and BDS to prospective SME clients.

Broadening FI

Decreasing the lower limit of SE loan from Tk.

200,000 to Tk. 50,000
Banks & FIs to take separate business
strategy for SME segment
To
reach
the
currently
unbanked
entrepreneurs i.e. to spatially broaden
Financial Inclusion banks and FIs
to
distribute yearly targeted SME portfolio
division, district and branch wise

Broadening of FI

Areas and cluster approach in financing to

be taken by the banks & FIs with
cluster/sector specific products and range of
financial services along with other value
added services for the entrepreneurs.
Banks & FIs to take steps for imparting
financial education to entrepreneurs through
training programs, booklets, posters and
using other mass communication media.
Emphasis on
development

women

entrepreneurship

Other Measures
Stakeholders meeting with Chambers of Commerce
& Industries, SME promotion agency of the
government
Meeting SME help desk at the BB head office
Mobile monitoring
Handling of complaints by the entrepreneurs.
Mobile/phone helpline for the entrepreneurs
Training for the bankers for awareness building and
capacity development
Cooperation with international organization (IFC,
ADB) for capacity building of the BBs staff
members and for the commercial bankers

Questio
ns?