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SME Banking: A Potential Source for Financing

Taher Ahmed Chowdhury

Small and Medium Enterprise (SME) business has emerged to accelerate country’s economic growth with the motto of alleviating poverty. SME is actually a funding provided by financial institutions in small and medium industries so that those entrepreneurs can run their own business without any crisis. It serves the person or businessman or the country as well. And a commercial bank can be the major source for financing SME.

Although SME business has not yet grown in full-fledged way, its potential success is up to the mark. Financial Express reported on February this year that in order to take forward the SME sector in Bangladesh and implement SME loan management and special initiatives in this sector, Bangladesh Bank introduced a new division named SME and Special Program Division on 31-12-2009. The SME and Special Program Division have taken a number of schemes, programs and policy initiatives for the development and expansion of small and medium enterprises.

With the industrial policy Bangladesh Bank and SME Foundation have taken so far a number of schemes and projects to ensure facilities including funding for the development and expansion of SME institutions where various commercial banks and financial institutions have been coming forward to fund SME institutions.

This initiative has been playing a noteworthy role for economic growth, employment generation, creating new business sectors, shrinking poverty and regional discrimination, ensuring equality of women and empowering them.

In addition, country’s central bank has taken further steps like opening of ‘dedicated desk’ for SME or SME service center in the banks and also ensuring special facilities for women entrepreneurs. The potential thing is an indicative target for SME loan disbursement has been set for 2010 by some banks and financial organizations considering its development of the most important development agenda of the country and core priority has been allowed to give for potential women entrepreneurs in regard to SME credit disbursement. Definitely, this is the matter of joy that these initiatives have taken so fast and implemented faster. Currently, most industries in the country are covered by the SME sector.

Our neighboring countries are also focusing heavily on SMEs. The SME is the employment generating machine that can be a tool to achieve economic growth, reduce income discrimination, and reduce poverty. In our country, SME funding is expanding in various industrial factories and business commerce. Presently, the contribution of 25 per cent is made by the SME sector to the GDP of the country.

So, the role of small and medium industries in the overall economic development of developing countries like Bangladesh is undeniable. Because of the shortage of labor and production time is short, it is able to contribute rapidly to increase national income and create jobs. The elimination of extreme poverty and the role of women in this field can play a pivotal role in equality and empowerment of women. SME sector is playing an important role in the economic development of many prosperous countries of Asia.

Since Bangladesh is emerging country with this SME business, to alleviate unemployment problems the commercial banks are coming forward to expand their supporting hands with it. But another important issue is good corporate governance because if there are no structured or set rules for the banks or financial sectors managed by good leaders, creating a good firm will not be possible. Good corporate governance is the synonym of creating good financial leaders. Finally, all concerned must understand the SME for the further development of the country because SMEs will create self-employment and employment opportunities for others.

The writer, Taher Ahmed Chowdhury is the DMD of  Islami Bank Limited

 

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