Despite having the potential to play a major role in boosting exports and overcoming the current dollar crisis, Bangladesh’s small and medium enterprises (SME) sector is neglected in getting finance for foreign trade, experts feel.
Though banks have created separate desks for SME loans, no such facility exists for finance for export-supported trade and only big exporters enjoy such facility, said Prof. Shah Mohammad Ahsan Habib of the Bangladesh Institute of Bank Management (BIBM).
As a result, SME businesses seek assistance from other big businesses to export.
He was presenting a research report titled ‘International Trade Finance and SME: Bridging the Gap’ at a seminar recently.
"We have seen the same trend in the RMG sector as well. At present, we need to prioritise trade finance for the SME sector at the policy level. Some facilities should be provided for them so that the sector can contribute to the country's economy," he was quoted as saying by Bangladesh media outlets.
Rejection of export applications has been a major hurdle for SME entrepreneurs. The five reasons for rejection are lack of collateral (36 per cent), high interest rates (18 per cent), lack of previous transaction information (17 per cent), high risk (11 per cent) and lack of sufficient documents (10 per cent).
The report is based on the data of five state-owned banks, two foreign banks and 23 private banks.
Sixty-seven per cent of banks claimed they had rejected 10-20 per cent of SME applications whereas 33 per cent of banks claimed they had rejected 20-40 per cent of the trade finance applications from SMEs and cottage and micro enterprises of trade finance during 2022. The challenges of woman entrepreneurs seem to be even higher.