Mahfuja Mukul: Despite pioneering microfinance support based on group guarantee Bangladesh still faces Tk 237 billion gaps against the demand of micro-credit.
Access to formal finance by MSMEs is limited compared to the average for the South Asia region, with an estimated financing gap of Tk 237 billion ($2.8 billion). Small and medium enterprises perceive access to finance as the third most important obstacle. In line with its vision 2021, the government of Bangladesh has sought to improve MSMEs’ access to finance through multiple channels.
Nevertheless, there still appears to be a sizable financing gap for MSMEs, estimated at Tk 237 billion ($2.8 billion) as per a calculation of International Finance Corporation (IFC).
The government has allocated Tk 3000 crore for the microfinance institutions under the refinancing scheme meant for loans to virus-affected marginal businessmen and farmers.
The Financial Inclusion Department of the Bangladesh Bank recently issued a circular in this regard.
“The maximum amount of financing by a bank to a microfinance institution will be 30 percent of the average loan distributed by the microfinance institution in last three years, or 5 percent of the total funds of the mentioned refinancing scheme, or the smaller amount above the two,” said the circular. In the previous circular, microfinance institutions could avail loans up to 2 percent of the total refinancing fund.
The central bank formed a revolving refinancing scheme in April for the virus affected marginal businessmen and farmers to ensure their inclusive participation in economic activities.
Under the scheme, the Bangladesh Bank has been providing funds to banks at 1percent interest, which they are lending to microfinance institutions at 3.5 percent interest. The MFIs are charging a maximum of 9percent interest from borrowers.
The MFIs registered with the Microcredit Regulatory Authority will only qualify for the loans. The virus affected clients will be prioritised for the credit which will be the highest Tk 75,000 for a single borrower.
In the case of the group-based financing with people involved in income generating activities, the maximum loan amount will be Tk 3 lakh for a group having at least five members.
Global Economist Forum president Dr Enayet Karim told, “The role of Small and Medium Enterprises (SMEs) is indispensable for overall economic development of a country particularly for developing countries like Bangladesh. Since this sector is labor intensive with short gestation period, it is capable of increasing national income as well as rapid employment generation, achieving Development Goals especially eradication of extreme poverty and hunger, gender equality and women empowerment.”
SME sector has played a vital role in economic development of some prosperous countries of Asia. Our neighbouring countries have also given due importance on SME. Terming SME as ‘employment generating machine’ he stressed on SME development for higher economic growth, narrowing the gap of income inequality and poverty alleviation. The present government has also put much emphasis on the development of SME sector considering it as ‘the driving force for industrialization,’ Enayet Karim pointed out.
In a query he told that the micro enterprises can create huge employments and help to alleviate poverty, he added.
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