Raise SME loan ratio to 25% by 2024

Bangladesh Bank yesterday asked banks and non-bank financial institutions to raise their loan disbursement ratio for cottage, micro, small and medium enterprises to 25 per cent of their outstanding loans by next year. 

From 2024, of all the loans provided to this sector, 50 per cent must be distributed among cottage, micro and small enterprises, according to a central bank notice.

Moreover, at least another 15 per cent will have to be given out to women entrepreneurs, 40 per cent to manufacturing, 25 per cent to service and 35 per cent to trading sectors.

The central bank had issued almost the same instructions to lenders in 2019, said a Bangladesh Bank official.

But this time, it has slightly revised the directives to give more clarity to lenders to this end, added the official.

Banks disbursed Tk 282,896 crore in loans for the cottage, micro, small and medium enterprise sector, which is 19.14 per cent of the outstanding loans disbursed by banks as of December last year.

This means banks will have to speed up their loan disbursements for the sector to attain the target, he said.

Many banks usually show a reluctance to disburse loans for the sector as the majority of small and medium enterprises are unable to show the required collateral, said a commercial bank official.

In addition, they deal will small amounts of capital, which is why they cannot absorb unexpected shocks emanating from the economy or other zones, said the official.

So, banks are cautious in disbursing loans for the sector, said the official.