The Supply Side Gaps and Opportunities of Small & Medium Enterprises (SMEs) in Bangladesh

Abstract

The growth and development of SME is largely dependent upon cheap and quick access to financial resources. More than ever before, nowadays SME contribute enormously to the economic development of a country; emerging economies top the list. In Bangladesh, 80% of the industrial employment comes through SME and hence much effort is being given toward flourishing it further. However, growth has been affected a lot with contracting funds in the hands of the owners making them vulnerable to slowing down. The major source of finance- the commercial banks face increasing risks from inexperience of the SME owners, lack of well prepared financial statements, in-depth knowledge about the actual need and government bureaucracies. This study attempts to light on the less pronounced challenges of SME development- those faced by the lenders or financers in the process. It has been found that in Bangladesh the segment is underserved by the financial institutions (FI) with less focus on providing customer-tailored products, no specialized credit risk assessment system and huge time required for credit clearance information are some of the bigger challenges. With the knowledge we will be able to identify the risks inherent in lending by the prime commercial banks as well as find solutions to increase the credit flow in the sector.

Keywords: SME, Participating Financial Institutions (PFIs), supply side, commercial banks.