Steps / Measures taken by Bangladesh Bank for documentation to ensure easy and speedy

SME Development loan sanction and disbursement process.

Bangladesh Bank for SME Development • Priority shall be given to small
entrepreneurs.
• BB has introduced several schemes and
programmes to flourish and expand SME • For more participation of women
Enterprises. entrepreneurs in industrial development of
the country and for conducting business
• Refinance scheme funded by BB, IDA and
activities by women entrepreneurs in large
ADB has been facilitated for the
number, priority shall have to be given to
development of SME Sector.
potential women entrepreneurs in respect
• BB has taken diverse steps; like opening of of SME credit disbursement.
‘Dedicated Desk’ for SME and ‘SME
• Banks & FIs shall put highest priority in
Service Centre’ in the banks and special
receiving loan application from small and
facilities for the women entrepreneurs.
medium women entrepreneurs and settle
• ‘SME and Special Programmes the loan disbursement process within very
Department’ established in BB which is reasonable time from the date of acceptance
solely responsible for policy formulation, of the application.
facilitating fund, monitoring and
• Each bank and FI shall establish a separate
development of entrepreneurship in the
‘Women Entrepreneurs’ Dedicated
SME sector.
Desk’ with necessary and suitable
Guidelines Formulated by the Department manpower, provide them training on SME
financing and suitably appoint a lady
• For compliance of the banks and NBFIs for
officer as chief of dedicated desk.
the development of SME sector are
enumerated below: • Branch wise list of ‘Women Entrepreneurs’
Dedicated Desk ‘ should be sent to SME
• An indicative target for SME loan
and Special Programmes Department of
disbursement is set by the banks and
BB within 2 months from the date of
financial institutions considering SME
declaration of this policy and program.
development as one of the most important
development agenda of the country. • Banks and FIs may sanction up to Tk.
25,00,000 to women entrepreneurs against
• According to the target, SME loan shall be
personal guarantee. In that case, group
disbursed to the small, medium and women
security / social security may be
entrepreneurs.
considered.
• Following the 'Area Approach Method'
• The success in SME loan disbursement will
banks/financial institutions will try to attain
be considered as yardstick for further
their indicative targets separately by
approval of new branches of the
dividing it as branch wise, region wise &
concerned bank.
sector wise.
• License for New Branches will be issued
• Each bank/FI shall follow a separate
for financing the priority sectors like SME
business strategy in financing SME loan
and agriculture in the name of ‘SME /
with least formalities in executing
 Agriculture Branch’ instead of ‘SME of new clusters in special sector,
Service Centre; in order to involve banks development & expansion of sustainable
in financing priority sector like SME and and competitive technology, skill
Agriculture’. development of entrepreneurs, development
of marketing channels, reduce credit risk
• Each bank/FI shall fix the interest rate on
and enhance overall product development.
SME loan sector/subsector-wise.
• A Cluster is a concentration of enterprises
• However, bank/FI will inform BB
producing similar products or services and
sector/sub-sector wise rate of interest
is situated within an adjoining geographical
immediately and ensure disbursement of
location around 5 km radius and having a
refinanced fund to the clients (women
common strengths, weaknesses,
entrepreneurs) at Bank rate +5% interest.
opportunities and threats”.
• Training programs shall be arranged for the
entrepreneurs. Key criteria selected to define a SME
cluster are as mentioned below:
Area Approach Method
• Products or services should be similar or
• ‘Area Approach method’ is applied for homogenous along with related products
SME sector like agricultural credit. • Enterprises must be production or
service units
• Territorial industrial production, type of
• Number of units: 50 and above
industrial products i.e. areas famous for
• Adjoining geographical location: several
industrial production or important due to
villages, wards, unions and industrial
geographical location should be taken into
estates
consideration while disbursing SME loan.
• Scattered within an area of 5 kilometer
• Cluster based approach is helpful for the radius
bank’s risk analysis and intensive
• There are 177 SME clusters located in 51
monitoring of SME financing.
districts with about 70 thousand enterprises
• For this purpose, light engineering clusters, and employing about 20 lac people. The
identified by IFC-SEDF and Upazila-wise approximate annual turnover of these SME
lists of potential SME sectors identified by clusters is about Tk295 billion. All these
Branch Offices of BB (after discussion with are naturally-grown clusters.
the local bankers).
• Taking development interventions in these
Cluster Development Policy clusters could lead the country to a
balanced development of all regions.
• Banks/FIs will inform BB after adopting
cluster development policy to flourish • Minimum resource allocation could offer
SME sector. optimum output because of location of
entrepreneurs in these clusters.
• CDP can be formulated in co-operation
with banks, financial institutions and • Development of these clusters could
NGOs. generate new employment, increase GDP
growth and foster poverty alleviation.
• The objectives of this policy are to
strengthen the existing cluster, development
• To identify a cluster we use three specific • Around 80%, 15% and 5% of enterprises of
indicators, these include interconnected the SME clusters are micro, small and
enterprises located in a specific location, medium-sized enterprises respectively.
producing the same or similar products
• All the SME clusters are mainly producing
and/or delivering homogenous services.
primary products and offering very basic
• Among the 20 lac workers of these SME services.
clusters, 74% are male and 26% are female.
• From the agro-processing sector, these
Each of the clusters on average employ
include manufacturing products such as
about 11,000 people with each enterprise
household items, consumer goods like rice,
on average employing 28 employees.
broken rice (commonly known as khud),
• Among the identified SME clusters, there husking dust (commonly known as Kura),
are burning wood (commonly known as 'lakri'),
oil, and oil cake (commonly known as
• 38 handicrafts and miscellaneous clusters,
'khail'), etc.
• 34 agro-processing/agri-business clusters,
• The following are the products and services
• 31 light engineering and metalworking offered by the other sectors.
clusters, 22 knitwear and readymade
• Light engineering sector: Doors and
garments clusters, 16 fashion-rich effects
window grilles, window frames, collapsible
clusters,
gates, iron and steel furniture, motor parts,
• 13 leather making and leather goods engine repair work, pumps, machine tools,
clusters, agricultural equipment, automobile body
building, repairing and coloring, ship
• 10 handloom and specialised textiles
breaking, etc.
clusters,
• RMG Sector: Threads, pants, jackets,
• 5 healthcare and diagnostics clusters,
three-piece sets for women,
• 3 plastics and other Synthetics clusters, towels/gamchas, shirts, measuring tapes,
frocks, baby clothes, suits, and clothes, etc.
• 3 electronics and electrical clusters, and
• Fashion designing and fashion-rich
• 2 educational services clusters.
sector: Jewellery made from gold/ silver/
• In terms of location, there are other metals, hair spa, hair proteins, party
makeup, eye-brow tweezers, herbal face
• 68 clusters located in Dhaka division,
packs, haircut, etc.
• 32 clusters in Rajshahi division,
• Leather goods sector: Men's shoes, ladies'
• 25 clusters in Chattogram division, shoes, baby shoes, sandals and slippers etc.
• 21 clusters in Khulna division, • Healthcare sector: X-rays, ultra-
sonograms, ECG and different pathological
• 12 clusters in Rangpur division,
tests, haematological tests, biochemical
• 10 clusters in Barisal division, and tests, echocardiogram, CT scans, and
surgery, etc.
• 19 clusters located in the Sylhet division.
• Plastics sector: Mugs, bowls, buckets, and required infrastructural facilities and utility
many other home appliances, etc. services, an unskilled and uneducated
workforce with no formal training, the lack
• Electrical and electronics
of a common approach to address the
sector: Electrical Boards, switches,
problems of environmental pollution, a
sockets, holders, coils, batteries, TV,
traditional and less-efficient production
electric cables, etc.
process, missing or unattainable economies
• Handloom and specialised Textiles of scale in some cases, the limited scope for
sector: Blouses, saris, ornas, three-pieces, product diversification, limited product
towels, panjabis, cushion covers, bed range, shortages of finance/ limited access
sheets, and pillow covers, etc. to finance,
• Handicraft and Miscellaneous • limited access to the latest technology,
Sector: Tables, mats, bamboo nets, large family-based business structures resulting
bamboo baskets, dhol (traditional drums), in a shortage of expertise, the absence of
tablas, kulas, candle stands, cup-plates, clay research and development supports, the
piggy-banks, flower vases, different dices, absence of skill development initiatives /
mud covers, tubs, oil-based perfumes, institutions, the absence of central
incense sticks, curry and rice cooking pots, warehousing facilities for raw materials and
bamboo goods, tray sets, bowl sets, file finished goods, etc.
sets, ruler sets, cylinder sets and wooden
• The opportunities for SME clusters
furniture such as beds, reading desks,
include the potential initiation of planned
computer desk, sofas, dining table, chairs,
interventions by the government and
etc.
development agencies, the growing demand
• From the list above, it is clear that SME for goods and services in the local and
clusters are producing a long list of national market, the slow but gradual
products to meet local demand that act as a improvement in infrastructural facilities
substitute for imports. and power supply,
• The major strengths of SME clusters • the initiatives by the SME Foundation for
include its ability to benefit from different planned development
economies of scale, easy access to local interventions, potential global markets for
raw materials, access to trade bodies' traditional products, an easily trainable
support, growing demand for products, easy workforce, potential public-private
management and administration, lower cost partnerships to create supportive
of production, small capital outlets, cultural infrastructure for SMEs, the establishment
affinity by opting for traditional production of common research and development
processes and inculcating a sense of bond centres / laboratory facilities set under the
through a similar type of production PPP, the scope for market linkage among
process, etc. the large and small firms in many sectors,
the scope for supply and value chain
• On the other hand, the major weaknesses
creation among enterprises, etc.
of the SME clusters include the unplanned
development of enterprises with limited • Finally, the major threats for the SME
scope for expansion, the absence of clusters include the import of cheaper
 products due to an open market policy, the • As of 30 June 2023, the total amount in the
non-availability of required capital for start-up fund had reached BDT 3.31 billion.
modernization, the uncertain availability of
• In addition, BB has also created a separate
utilities connection and supply, the arrival
fund of BDT 5.00 billion to facilitate
of better quality substitute products, the
refinance options for start-up financing.
presence of trade diversion rather than trade
creation, the introduction of efficient • By June 2023, BDT 0.16 billion was
technology in competing industries, the disbursed from this fund to support 70
shrinking of local and national markets due customers under the "Start-up Fund"
to the flood of imported products, the initiative.
growing concerns of environmental
• Access to finance is vital for SME sector
pollution may limit the growth of
development.
enterprises, the economic fallout of the
Covid-19 lockdowns, etc. • Entrepreneurs raise complain regarding
high rate of interest.
• Based on the above SWOT analysis and
presented statistics we can state that the • Higher rate of interest is a major hindrance,
SME clusters have a huge potential to but availability of adequate fund is very
contribute to the socio-economic much important.
development of Bangladesh if the
• That is why, BB is committed to facilitate
government can undertake certain key
SME credit through refinance window.
development interventions and/or declare
the SME clusters as Special Economic • For the development of SME sector, BB is
Zones. providing refinance facilities to banks and
NBFIs against their disbursed SME credit
Strategies for cluster development :
from its own fund along with the assistance
• - Identification of the cluster; of ADB, IDA, and JICA.
• - Formation of committee for cluster • At present, refinancing from 5 funds is
development; running-BB Fund, JICA FSPDSME Fund,
New Entrepreneurs Fund, Agro Fund,
• - Conduct baseline survey & diagnostic
Islamic Shriah Fund.
study;
• A total amount of BDT 178.00 billion was
• - Fixation of action plan;
provided to different banks and NBFIs
• - Implementation of action plan; under different refinance/pre-finance
schemes up to June 2022.
• - Review & monitoring.
• Generally under a refinance scheme, a bank
Financing SME Sector
collects the amount from the central bank
• BB has instructed all scheduled banks to after lending to the customer.
establish a "Start-up Fund" by allocating
• On the other hand, under the pre-finance
1% of their annual net profit each year,
scheme, a bank sets a target for loan
beginning in 2020 and continuing for the
disbursement and collects it in advance
next five years.
from the central bank. Later that money is
distributed among the customers.
Priority to the Small Entrepreneurs creativity and expertise of women society
make us surprised.
• Among SME enterprises/entrepreneurs in
our country, small entrepreneurs have more • Especially women participation in micro
prospects for generating employment, credit programmes and readymade
reducing unemployment and achieving garments industry is contributing
economic growth. significantly to the country’s
industrialization.
• Keeping this in view, at least 40% of the
total disbursement target of SME credit • BB has taken some steps and formulated a
should be reserved for small entrepreneurs guideline for the banks & FIs to ensure
and the rest will be allocated to medium more institutional financial facilities for
entrepreneurs. women entrepreneurs in SME sector.
• The number of borrowers belonging to a. According to the policy of SME &
small segments increased dramatically from Special Programs Department as
65% in 2010 to 91 % in 2015. However, regards financing women entrepreneurs
out of targeted Tk20 thousand crore, only Banks/FIs must maintain 10% of their
Tk13,505 crore worth of loans were total CMSME loan portfolio and the
disbursed in FY22, which is only 67.52% percentage will have to be raised at least
of the total target. 15% by the year 2024.
Industry (Manufacturing) and Service Sector b. This will include more women in the
financial system which will ultimately
• Industry and service sectors are given
expedite the women economic
priority over the business sector under
empowerment.
refinance scheme by Bangladesh Bank.
c. The size of Bangladesh Bank own
• 100% claims in industry and service sector
source fund ‘Small Enterprise
is being refinanced.
Refinance Scheme’ has been increased
• This policy will be continued to create a from Tk850 crore to Tk1500 crore to
friendly environment for employment include more entrepreneurs specially
generation and higher production. women entrepreneurs from remote areas
in the financial activities.
Special arrangement for Women
Entrepreneurs d. The eligibility criteria of availing
CMSME Refinance Facility by the state
• Women participation in the mainstream of
owned commercial Banks has been
economy is crucial for attaining sustainable
relaxed to expedite the process.
economic growth & poverty reduction.
e. The size of Bangladesh Bank own
• But women participation in institutional
source fund ‘Small Enterprise
economic sector is inadequate & the rate of
Refinance Scheme’ has been increased
women entrepreneurs is very low compared
from Tk850 crore to Tk1500 crore to
to that of male counterparts.
include more entrepreneurs specially
• There exist many obstacles in women women entrepreneurs from remote areas
participation in the mainstream of economy in the financial activities.
although the degree of integrity, devotion,
f. The eligibility criteria of availing information in the grassroots level
CMSME Refinance Facility by the state through discussion, seminar & view
owned commercial Banks has been exchange programmes.
relaxed to expedite the process.
o. i. If any women entrepreneur face
g. a. To ensure institutional credit problem or harassment they can contact
facilities, at least 15% of total BB directly Problem Solutions Centre of
refinance fund for SME sector has been SME & Special Programmes
allocated for women entrepreneurs. Department through +88029530220.
h. b. Interest rate for women entrepreneurs
will be Bank rate (which is at present
Recently, Bangladesh Bank has instructed
3%) plus maximum 4%; i.e. not more
all banks and NBFIs to select at least three
than 7% per annum.
prospective women entrepreneurs who have not
i. c. Banks/FIs will accept and settle all taken any loan from the bank branches.
types of loan applications of SME
After selection of borrowers, banks/NBFIs
women entrepreneurs with the highest
are advised to provide training and bring at least
priority (within 10 working days of
one woman entrepreneur under the banking
receiving complete loan application).
services.
j. d. Banks and FIs shall take initiative to
Under this initiative, more than 10,000 new
advertise all the facilities for women
women entrepreneurs were promoted during
entrepreneurs in both electronic & print
April-December 2015.
media.
Identification of the Real Women
k. e. Banks and FIs may provide a
Entrepreneurs
maximum loan facility of
Tk.25,00,000/- against personal • To identify the real women entrepreneurs,
guarantee if borrower is woman or assistance can be sought from Bangladesh
majority of the owners of the enterprise Small and Cottage Industries
are women. Corporation(BSCIC), SME Foundation &
professional organizations, such as,
l. f. Banks/FIs shall establish special
Handloom /Handicrafts Association,
advice and service centre for women
Mahila Samity, different Women
entrepreneurs in selected branches and
Entrepreneurs’ Association, such as,
ensure service friendly approach
Bangladesh Women Chamber of
towards women entrepreneurs.
Commerce & Industries (BWCCI), Women
m. g. provide 03-06 months grace period Entrepreneurs Association of Bangladesh
facility for the term loan (1yr-5yr) in (WEAB), Bangladesh Homeworkers’
Favor of CMSME Entrepreneurs Women Association (BHWA), National
including women entrepreneurs. Association of Small & Cottage Industries
of Bangladesh ( NASCIB) etc.
n. h. Recently BB issued Lead Banks
Guidelines (15 January 2020) & Collateral
developed a Lead Bank Calendar to
disseminate CMSME related
 • Lack of collateral of small entrepreneurs is • The entrepreneurs often raise complaints
deemed as a major hindrance to the regarding short duration of grace period for
expansion of SME credit. repayment of SME loan. Therefore, banks
and FIs will consider the reasonable grace
• Banks/FIs may provide collateral free credit
period at the time of formulating credit
facilities up to Tk. 25,00,000 against
policy for SME sector.
Personal Guarantee in SME sector
especially for small and women Eligibility of the Borrower
entrepreneurs.
• Real entrepreneurs who are directly
• Credit can also be provided against involved in SME sector will be considered
hypothecation of products and machineries, eligible for SME credit.
if needed.
• Generally loan defaulters will not be
• However, banks and FIs shall follow their entitled to get new loan.
own rules and banker-customer relationship
Interest Rate on SME Credit
to determine collateral for credit facilities
more than Tk.25,00,000. • Banks/financial institutions shall fix up the
interest rate on small and medium loan for
• Banks and FIs shall apply their own due
the respective sector/sub-sector. The
diligence method [information comprises
operating cost of the banks is high for the
the facts about a customer that should
small entrepreneurs. Reasonably, the rate of
enable an organization to assess the extent
interest in this sector is somewhat higher.
to which the customer exposes it to a range
of risks.] in selecting entrepreneurs. Outsourcing of Credit Disbursement
• Banks/FIs shall formulate their own credit • Banks/FIs may seek assistance from private
policy following the guidelines of the organizations/NGO/ self-help group for
Central Bank as minimum benchmark and selecting borrower, monitoring of credit
inform SME and Special Programmes disbursement, recovery, motivation of the
Department of Bangladesh Bank. borrowers, training for them etc.
• Group security or social security can also • The SME sector in Bangladesh faces
be considered in formulating such policy. problems both from supply side and
demand side. However, to address the
Acceptance and Consideration of Application
supply side problems, three refinance
• Respective bank branch will sanction the schemes of Bangladesh Bank are already in
SME loan limit considering the annual place.
requirement and following the existing
Supply and Demand Side Problems
credit norms.
• Besides, the banks/financial institutions
• Respective branches will accept the
have fixed target for disbursement in the
application of the small and medium
current year.
entrepreneurs with their annual production
plan. • The main problem of the demand side
includes: marketing of products, lack of
Grace Period
skill and knowledge of the entrepreneurs to
 improve quality of products, absence of • Three tier monitoring systems (BB Head
SME information data base etc. Office, BB Branch Offices and Banks) will
be established in case of SME credit.
• In order to develop genuine SME
entrepreneurs, it is essential to arrange trade Purpose of the Monitoring of SME Credit:
fairs of the SME products matching buyer-
a. To achieve the overall target of SME loan
supplier improving the quality of product
disbursement
and package design, workshop and training
on technology and design development. b. To achieve sector wise industrialization; such as
higher growth of industry and service sector,
New Entrepreneurs Creation
increasing the number of women entrepreneurs
• To promote skills of young workers and and their development, district wise employment
new entrants in the labour market, the GoB generation and poverty reduction;
has taken a project titled "Skills for
c. To provide required credit to the small
Employment Investment Programme
entrepreneurs without any harassment;
(SEIP)" with the assistance of ADB and
Swiss Agency for Development and d. Special monitoring of the banks performance in
Cooperation (SDC). providing credit to the women entrepreneurs;
• Aligned with this initiative BB has also e. To ensure area approach and cluster-based
taken steps for creation and development of credit disbursement.
new entrepreneurs.
f. To ensure satisfactory recovery of the disbursed
• To this end, BB will provide market credit in this sector to address any liquidity crisis;
oriented job training to 10200 people in the
g. And so on.
next three years to start their own SME
business or be employed in the SME sector. Methods of Monitoring of SME Credit
Training Programmes Monitoring in the Head Office of the Central
Bank:
• For the purpose, the commercial banks and
international donor agencies are requested • An ‘SME Loan Monitoring Cell’ has been
to arrange training on entrepreneurship set up in the ‘SME and Special
development where Bangladesh Bank plays Programmes Department’.
the supporting role.
• To achieve the objectives of SME credit
• Besides, institutions like BBTA, BIBM, policy, the Monitoring Cell
DCCI, FBCCI, NASCIB, BWCCI, SME comprehensively monitors the SME credit
Foundation will be requested to arrange management at the field level.
training programmes on the development of
• In addition to the off-site & on-site
technology, skill and marketing of SME
supervision of SME loan, the respective
products.
Cell takes necessary steps against any
• The banks and FIs will incorporate the complain regarding SME credit subject to
implementation status of such training investigation.
programmes in their annual report.
Submission of Information/Statements:
Monitoring of SME Credit
 • To review the annual implementation • The banks will take the following
progress of SME credit programmes, the steps to ensure sincerity, efficiency and
respective banks/ financial institutions speed in sanctioning and disbursement of
submits accurate information /statements as SME loans.
per format regarding SME credit on
• Simplifying of the SME credit Application
quarterly basis to BB within 15 days of the
Form;
next month following the quarter under
reporting. • Guidance for filling up the application form
and all other requirement should be advised
• Besides, the existing statements are
at the time of supplying the application
required to be continued as usual.
form to avoid delay;
Monitoring in the Branch Offices of the Central
• All supplementary queries shall be made to
Bank
the applicant in one instance;
• SME Credit Monitoring Cell is established
• The letter requesting the Credit Information
in the branch offices of Bangladesh Bank
Bureau (CIB) of BB to verify loan
like Head Office. This Cell takes effective
classification status of the applicant shall
steps to monitor the SME credit
marked “SME, the priority” and CIB
disbursement and recovery activities by the
provides the same on priority basis;
banks/financial institutions of their
respective areas intensively. • Quick settlement of borrower’s complain;
Monitoring in the Banks Level: c. Core Group or Cell was established to
monitor SME credit disbursement activities, to
• The respective banks have to ensure
take new steps and solve problems surfaced at the
effective monitoring system so that real
field level rapidly.
entrepreneurs can get the SME credit in
time according to the SME credit policy d. SME credit related item is included in the
and credit norms. agenda of annual/half yearly managers’
conference.
• They will also ensure that the entrepreneurs
do not face any harassment and the e. The officials in the regional/branch level are
indicative target of SME credit is achieved. rewarded on the basis of performance of SME
credit disbursement and recovery.
• Respective banks will set up ‘Monitoring
Unit’ and inform the same to Bangladesh f. Modern information technology especially
Bank. Mobile Phone, E-mail etc. are used in order to
monitor the activities of the regional offices and
• Monitoring by the Head Offices of the
branches intensively.
Banks:
Monitoring Activities in Regional Offices
a. As part of their business strategy, higher
authorities of banks must have clear vision and a. The smooth implementation of the SME
direction about disbursing SME credit. programme is monitored at regional offices
level of the banks. For the purpose, SME
b. The banks sanction credit in favour of the
Credit Monitoring Unit is established in the
customers after considering their credit worthiness
regional offices. The members of the
and other relevant matters.
Monitoring Unit visit their respective areas
 from time to time to monitor that the e. e. Arranging SME loan to interested
disbursement is progressing in line with the eligible and bonafied entrepreneurs through
target. easy transparent process and in a timely
manner;
b. The role of Regional Offices perform the
role of coordinator between higher f. f. Monitoring of the proper utilization of
authority of the bank and the branches. disbursed loan;
c. As a part of regular monitoring, the officers g. g. Gearing up monitoring of SME loan
of Regional Offices/Monitoring Unit recovery activities.
arrange meeting with the officers of their
Preservation of Mobile Phone number of the
respective branches and visit the branches
Clients
from time to time to ensure that the
potential entrepreneurs do not face any • To facilitate easy communication for proper
harassment. monitoring of SME credit disbursement at
field level mobile phone number of each
They address complain related to SME
borrower should be preserved at branches
credit instantly’ provide required directions to the
(mobile number of neighbour or close
branches and assist them to solve the problems
relative may be preserved marking ‘on
existed in the branches.
request’, in case the borrower don’t have
Activities to be performed at the Bank his own mobile).
Branches
• A mobile/telephone directory of the SME
• The success of SME credit disbursement borrowers may also be maintained at
programmes mostly depends on the branch level.
performance of the bank branches.
Availability of Information
Therefore, the bank branches have to
perform dynamic role in sanctioning and • Banks display the detailed information
disbursing SME credit. Bank branches regarding SME credit facilities in their
perform the following activities to disburse website and also in each of their branches
and recover SME loan: at a common and easily noticeable place.
a. The branch manager evaluate/decide the • Banks maintain sector wise
demand for and scope of SME loan (industry/product) information of credit
disbursement. In this context, arrangement flow, rate of default, employment creation
is made to disburse SME loan in the local etc.
potential sectors.
• This information helps in evaluating the
b. Special initiative is taken to disburse SME effectiveness of existing guidelines adopted
loan to the small women entrepreneurs; by the government and assists in
formulating SME guidelines in the future.
c. c. Identifying the courageous and
successful small entrepreneurs and bring Incentives
them under loan activities / programme;
• SME loan should be extended to rural areas
d. d. Motivating the entrepreneurs through instead of centralizing at urban areas. The
necessary and comprehensive publicity; overall success in SME target achievement
will be considered as an important criteria
 for allowing the respective banks to open • Guarantee given by the group is mostly
new branch, Authorized Dealer (AD) used as Group Security for the repayment
branch and exchange houses abroad. of the loan.
SME Service Centre: • If any member becomes defaulter, whole
group will be considered as defaulter and
• The banks (Private and Foreign) have so far
will be deprived of further loan.
opened 210 SME service centres to provide
more facilities to SME clients. • As a result, defaulter member will be bound
to pay the loan under the pressure of group
Explanation of Few Terms
members.
Cluster:
Women Entrepreneur:
• A cluster may be defined as a local
• An woman engaged in business in her own
agglomeration [an extended town area] of
name will be treated as women
enterprises (mainly SMEs but often also
entrepreneur.
including some large enterprises) which are
producing and selling a range of related and • The women entrepreneurs should be given
complementary products/services. priority for SME loan and special facility
(low rate of interest) will be entitled under
• For example, leather and leather products
special consideration.
manufacturing enterprises at Hazaribag of
Dhaka is treated as the cluster of leather • It may be mentioned that if a woman
goods. entrepreneur owns/ possesses more than
50% shares of a business, it will be deemed
• Clusters are identified considering various
as a business conducted by woman
factors such as-geographical area, product
entrepreneur and will be entitled for
or service etc.
facilities under special consideration.
Social Security/Collateral
Loan/Investments:
• Social security/collateral refers to the
• Islamic banks operating in our country term
guarantee given by any social
‘SME financing’ as ‘Investment’ instead of
institution/social community (acceptable to
‘Loan’.
both parties) to secure the loan.
• For this reason, the term ‘investment’ used
• For example, when any business
by Islamic banks is interchangeable with
organization (Chamber of Commerce and
the word ‘loan/credit’ in SME financing.
Industry/Association) gives
guarantee/assets as security against the loan
taken by a person associated with the
organization can be called social security.
Group Security/ Collateral:
• Group security means the security given by
the group jointly against the loan taken by a
group member. Security includes both
assets / guarantee.