dr. atiurrahman former governor, bangladesh bank dr. m ... · source : bangladesh bank no. of...

PROMOTING INNOVATIVE FINANCING MODELSFOR SMES:

THE BANGLADESH EXPERIENCEDr.Atiur Rahman

FormerGovernor,BangladeshBank&

Dr.M.AbuEusufChairman,DepartmentofDevelopmentStudies

Director,CentreonBudgetandPolicyUniversityofDhaka

Presented at the “Workshop on small and medium enterprises’ access to finance and the role of developmentbanks in Asia and the Pacific and Latin America” on 27 September 2017 at United Nations Conference Center,Bangkok, Thailand

Research Collaboration with

Centre on Budget and Policy, University of Dhaka

TALKING POINTS

• DevelopmentalRoleofBanks

• FinancingSMEsinBangladesh

• TheSharedRoleoftheCentralBankandtheCommercialBanksinPromotingWomenEntrepreneurship:SummaryofSurveyFindings

• WayForward

DEVELOPMENTAL ROLE OF BANKS

DEVELOPMENTAL BANKING:OUR PHILOSOPHY

Sustainable&inclusive

development

Sustainable&inclusive

development

Channelizingfundstotheground

Channelizingfundstotheground

Diversifyingdeliverychannels

Diversifyingdeliverychannels

Innovative&inclusivefinancialproducts

Innovative&inclusivefinancialproducts

• Bangladeshisbeingpraisedforitsinnovativefinancialinclusionstrategy

• Thecentralbankofthecountryhasbeenleadinginbringingmotivationalchangesamongstbankersandothersinvolvedinthefinancialsector.

SMEFINANCING:ACORE COMPONENT OF DEVELOPMENTAL BANKING

EnsuresaccesstofinancefornewentrepreneursEnsuresaccesstofinancefornewentrepreneurs

CreatesemploymentopportunitiesformanyCreatesemploymentopportunitiesformany

Resultsinresilience(tofinancialshocks)Resultsinresilience(tofinancialshocks)

Contributesinachievingmacroeconomictargets.Contributesinachievingmacroeconomictargets.

FINANCING SMES INBANGLADESH

CHARACTERISTICS OFSMEFINANCING IN BANGLADESH

Areaapproach&clusterbasedfinancing

Dedicatedrefinancescheme

20%ofthetotalcreditforMSME

10%ofMSMEcreditforwomen

Dedicatedhelpdeskforwomen

CURRENT STATUS OF OVERALL SMEFINANCING

Source:BangladeshBank

‐20,00040,00060,00080,000100,000120,000140,000160,000

2011 2012 2013 2014 2015 2016

YearwisecumulativedisbursedamountofCMSMEcredit(figuresincroreBDT) Upto2016,

cumulativeamount

disbursedisaround142thousand

croreBDTandno.of

accountsisover630thousand

CURRENT STATUS OF WOMEN SMEFINANCING

‐

1,000

2,000

3,000

4,000

5,000

6,000

2011 2012 2013 2014 2015 2016

YearwisecumulativedisbursedamountofwomenCMSMEcredit(figuresincroreBDT)

Upto2016,cumulativeamount

disbursedisover5

thousandcroreBDTand

no.ofaccountsisover40thousand


BANK‐MFIPARTNERSHIP FORINNOVATIVE SERVICE DELIVERY

BANK‐MFILINKAGE:THE CONTEXT

• TherearestillsubstantialsegmentsofpotentialclientswhoarebeyondthereachofMFIs.

• Inadequatefundingisregardedtobethemostimportantreasonbehindthis.

• Conversely,formalfinancialserviceprovidersarenotinthepositiontodirectlyreachthemicro‐creditclients.

• Hence,linkingMFIswithscarcefundandBankswithexcessliquidityappearedasaprudentsolution.

BANK‐MFILINKAGE:CURRENT STATUS

Sl. NameoftheOrganisation

BillionTk.

1. BRAC,Dhaka 40.532. BUROBangladesh 11.863. TMSS 2.964. BEES 2.095. UDDIPAN 2.036. PMUK 1.807. RDF 1.458. SFDW 1.399. RRF 0.7610. ECB 0.69

Others 12.33Total 77.89

8.99

16.49

0.55 0.457

23.64

2.44

12.84

0.56 0.31 0.14

6.43

2.98

0

5

10

15

20

25

LocalBank

Int'lDonor

INGO LocalNGO

PKSF Others

2002 2015

LoanofMFIsfromlocalbanks Shareofexternalsourcesintotalfund(%)

Source:CDF(2002,2016)

LOAN TO SHARECROPPERS:AGOOD EXAMPLE OF BANK‐MFIPARTNERSHIP


BBchannelsBDT6billiontoBRACforcreditprogramforsharecroppers(cumulative3,000+croreBDTbetween2009‐16).

319thousandsharecroppersfrom46districtstobecovered(59%borrowersarewomen)

BRACborrowsfromBBat5percentinterestrate,deliverscollateralfreeloantosharecroppersat10percentinterestrate

Reduceddependenceoninformalmoneylenders;higherextentofpositivechangereportedcomparedtoMFIclients

AGENT BANKING:THE NEWWAY OF BANKING

AGENT BANKING:COST SAVING APPROACH TO REACH THE UNBANKED


No.ofAccounts TotalOutstanding(incroreBDT)

544,536

712,499872,865

380.68481.38 651.21

AgentbankinginBangladeshisflourishingasbankshaveaccepteditasacostsavingapproachtoreachtheunbanked.Thisisalsoabankledmodelthatreliesheavilyonuseoftechnologyincludingcorebankingsolutions.

AGENT BANKING:COST SAVING APPROACH TO REACH THE UNBANKEDAgentbankingsuitsmostthecustomersnoteligibleformicrocredit,butalsonotbigenoughformainstreamfinance.

Example:4.5millionRMGworkers(only5%ofthemsavethroughformalchannels).

Combinationofe‐commercewithbiometricidentificationhascreatedthisuniquescope‐ Thoseusuallyafraidofgoingtoabankbranchnowhavetheserviceattheirdoorsteps. Positivechangeinsavingsbehavior(creatingscopeoffutureentrepreneurship). Agentsthemselvesarealsoearning.

Source:TheWallStreetJournal[http://partners.wsj.com/metlife/multipliers/articles/agents‐of‐change/]

THE SHARED ROLE OF THE CENTRAL BANKAND THE COMMERCIAL BANKS IN PROMOTINGWOMEN ENTREPRENEURSHIP:SUMMARY OF

SURVEY FINDINGS

CENTRAL BANK‐COMMERCIAL BANK LINKAGE:THE CONTEXT

• TheCentralBankhastakenanumberofpolicyandprogrammaticinterventionstosupportandpromotethewomenentrepreneurs.

• Akeyfocushasbeentocreateincentivesforthecommercialbanksothattheycanfacilitatewomen’saccesstocredit.

• Anenablingenvironmenthasalsobeenpromoted• Efforthasbeentakentodevelopasenseofsharedresponsibilitywhereboththeentitieswillworkincollaborationtopromotewomenentrepreneurship

THE FOCUS OF THE STUDY• The study has been carried out by the Centre on Budget and Policy atthe University of Dhaka with the support from the Asia Foundation.

• The major focus of the study is to explore whether this collaborativeeffort (between the Central Bank and the Commercial Banks) haspositively affected women entrepreneurs

• To that end, emphasis has been placed on finding answers to thefollowing three questions‐

• What are the key barriers faced by the women entrepreneurs in gaining access tomarket and becoming engaged in different business ventures?

• How effective is the collaborative effort in addressing these barriers?• What more can be done?

THE FOCUS OF THE STUDY…

• The study, therefore, focuses both on the demand (womenentrepreneurs) and the supply side’s (commercial banks) perspective

• Try to find out the equilibrium• Explore the role of District Women Business forums in generating theequilibrium

METHODOLOGY

• A mixed‐method approach• To understand the demand side’s perspective‐

• 300 women entrepreneurs have been randomly selected and surveyed• The participants have been selected from six divisional districts of Bangladesh

• To understand the supply side’s perspective• Key Informant Interviews and FGDs have been done with the Central Bank and the Commercial Bank officials (from six divisional districts)

• National level Central Bank officials have also been interviewed• To explore the role and performance of District Women Business Forums

• Key Informant Interviews and FGDs have been conducted in five districts‐ Barisal, Khulna, Rajshahi, Rangpur and Sylhet

• Both the leaders (Presidents, Vice‐Presidents) and the General Members have been interviewed

CHARACTERISTICS OF WOMEN ENTREPRENEURS

YoungwomenaregettinginterestedinSMEs.YoungwomenaregettinginterestedinSMEs.

EducatedwomenaregettinginvolvedinSMEs.EducatedwomenaregettinginvolvedinSMEs.

Over85%ofwomenenterprisesaresoleenterprises.

Over85%ofwomenenterprisesaresoleenterprises.

The thrust for economic solvency has engaged women in SMEs.

The thrust for economic solvency has engaged women in SMEs.

About 81% women entrepreneurs have bank account.

About 81% women entrepreneurs have bank account.

Source:CBP‐TheAsiaFoundationSurvey,2016

DEMAND SIDE PROBLEMS

Improved overall knowledge though the pace of this improvement is not satisfactory

Improved overall knowledge though the pace of this improvement is not satisfactory

lack of financial capital as the key barrierlack of financial capital as the key barrier

lack of knowledge and information (33% never heard about help‐desk and only 18% knew about helpline support)

lack of knowledge and information (33% never heard about help‐desk and only 18% knew about helpline support)

19% of the women entrepreneurs have not opened any bank account

19% of the women entrepreneurs have not opened any bank account

Hesitant in getting loan from banks, only 48% have applied for loan

Hesitant in getting loan from banks, only 48% have applied for loan

Lack of experiences,focus on some specific business ventures

Lack of experiences,focus on some specific business ventures


SUPPLY SIDE PROBLEMS

Inadequate policy frameworkInadequate policy framework

Requirement of guarantors Requirement of guarantors

Absence of monitoring frameworkAbsence of monitoring framework

High interest rateHigh interest rate

Issues related with collateralIssues related with collateral

Negative attitude of commercial banks about women entrepreneurs

Negative attitude of commercial banks about women entrepreneurs


CAN DISTRICT WOMEN BUSINESS CHAMBERS BRIDGE THEGAP:AN ANALYSIS OF THEIR PERFORMANCE

• The district women chambers have adequate knowledge aboutgovernment services and initiatives and provide the womenentrepreneurs with necessary information

• Have limited success in connecting the women entrepreneurs withbanks

• Capacity to influence policy and programs is quite limited• Limited interaction with national level policy making bodies

Summary of the Problems

• Three Broad Types• Capacity related problems: capacity of the individual entrepreneurs needs to be strengthened significantly.

• Policy related problems: Policy interventions should be there which would allow women entrepreneurs to deal with problems related with guarantors and collateral.

• Implementation related problems: Our study also indicates that developing a ‘good’ policy is never enough unless and until the implementing partners and agencies understand their duties and responsibilities properly.

WAY FORWARD:RECOMMENDATIONS

PROBLEM SPECIFIC RECOMMENDATIONS

• Capacity Development‐• Efforts to build the capacity of the women entrepreneurs should continuewhere the women chambers can take the lead

• The chambers should also organize regular view‐exchange meetings to helpthe women entrepreneurs understand the loan‐getting procedure, tointroduce them with different institutions, and to connect them withorganizations which can in future fund their business initiatives.

• Policy Issues• The women chambers can take the lead and they may analyze the currentinitiatives to identify the limitations, suggest specific policy measures andlobby the government agencies to initiate policy changes.

PROBLEM SPECIFIC RECOMMENDATIONS …

• Implementation‐related Problems• The central bank can take the initiative to introduce a target‐based approach,where targets will be set for the commercial banks for each month (i.e. targetcan be related with number of loans approved, number of womenentrepreneurs assisted etc.);

• At the local level (possibly at the district or sub‐district level), a separateinstitutional arrangement can be established

• to monitor the activities of the commercial banks• To evaluate whether these banks have managed to reach the agreed upon target and ifnot, why.

• This organization will then report to the national level and may suggest actions thatwould enhance women’s access to credit.

CREDIT GUARANTEE SCHEMES:MITIGATING THE RISKS

• Creditguaranteeschemesneedtobeinplacetoaddresstherisks.• Thereshouldbeallocationsinthenationalbudget.• TheCentralBankcanleadtheendeavor.

• ExperiencefromMalaysia(CreditGuaranteeCorporation,CGC)canhelpothercountrieslikeBangladesh.

• MultilateralorganizationslikeWorldBank,ADBcanprovidenecessarysupport

PROMOTING INNOVATION &LEARNING BY DOING• Surely, Bangladesh has come a long way in promoting SMEs:‐ SME foundation also complementing in promoting SME development,‐ regular women entrepreneurship fair,‐ regular road shows by the Central Bank

• Wehavefollowedthe“learningbydoing”.

• Nowitistimetoscaleupandtocollaboratewithaviewtomaximizethebenefits.

• Dialoguebetweenstakeholdersfromandbeyondthecountrymustcontinuebecauselearningisaneverendingprocess.

INTEGRATING LOCAL INSTITUTIONS

• Theroleoflocalinstitutionsinpromotingwomenentrepreneursiswellacknowledged.

• The association of women entrepreneurs can play important rolein building network with the financial, regulatory, and othersupportive institutions.

• During policy preparation, the engagement of local institutionsshould be ensured.

dr. atiurrahman former governor, bangladesh bank dr. m ... · source : bangladesh bank no. of...

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