Scheduled banks and non-bank financial institutions continued to ignore rural entrepreneurs in disbursing small and medium enterprise loans as they distributed to them (rural entrepreneurs) only 24.17 per cent of the total SME loans they sanctioned in the first nine months of this year. According to the latest Bangladesh Bank data, the banks and NBFIs disbursed Tk 17,419.84 crore in loans to the SMEs located in the rural areas from January to September of 2014 under the BB’s small and medium enterprises credit programme. They distributed total Tk 72,062.24 crore in SME loans under the programme in the period.
Experts and BB officials said that a number of banks and NBFIs were reluctant to disburse loans to the SMEs located in the rural areas as they were not bound by laws to give certain amount of such loans in the rural areas.
Due to the lower SME loan disbursement in the rural areas, the cluster-oriented SME industries are not getting adequate loans from the banks and NBFIs and thus the SME activities of the BB have put very little impact on the country’s rural economic situation, they said.
The four state-owned commercial banks — Sonali, Janata, Agrani and Rupali — disbursed Tk 860.49 crore, or 4.93 per cent of the total SME loans of Tk 17,419.84 crore distributed in the rural areas by all banks and NBFIs between January and September.
The BB data showed that the local private commercial banks disbursed Tk 15,857.41 crore, or 91.03 per cent of the total SME loans distributed in the rural areas in the first nine months.
The foreign commercial banks disbursed only Tk 2.50 crore, or 0.01 per cent of the total SME loans distributed in the rural areas.
In the first nine months of this year, the 31 NBFIs disbursed SME loans of Tk 244.17 crore, or 1.40 per cent of the total SME loans distributed in the rural areas.
The BB data, however, showed that the SME loan disbursement by banks and NBFIs in the first nine months of this year increased by 15.35 per cent to Tk 72,062.24 crore from that of Tk 62,472.54 crore during the same period a year ago.
A BB official said the central bank did not specify the amount of SME loans to be disbursed by banks and NBFIs in the rural and urban areas.
‘So a number of FCBs and NBFIs have not disbursed any SME loans in the rural areas in the first nine months of this year,’ he said.
Bangladesh Institute of Development Studies research director Zaid Bakht told New Age on Friday that banks were reluctant to disburse SME loans in the rural areas considering poor loan recovery as the potential enterprises were located in the urban areas.
He said that the demand for SME loans in the urban areas was now better than the rural areas that also pushed up the loan disbursement in the city areas.
Most of the private and foreign commercial banks have not adequate branches in the rural areas and that also hampers SME credit flow in the areas, he said.
For this reason, the cost of fund for the SME loans disbursed in the rural areas is relatively high as the monitoring process for such type of loan is not cost effective, Zaid, also the chairman of Agrani Bank Ltd, said.
Besides, the ratio of defaulted loans in the SME sector is more than that in other sector loans, he said adding that banks showed reluctance to disburse credit to the SMEs located in the rural areas to mitigate unexpected risks.
Asked why the SCBs did not disburse adequate SME loans in the rural areas despite having a huge number of branches in the areas, the BB official said the SCBs were not allowed to get any loan under the refinance funds of the BB, Japan International Cooperation Agency and Asian Development Bank.
The SCBs failed to maintain quality as per the requirement of the refinance funds, the official said.
He said, ‘The main objection made by the foreign donor agencies is the high amount of classified loans held by the SCBs.’
-With New Age input
