Dr. AtiurRahman Former Governor, Bangladesh Bank Dr. M ... · Source : Bangladesh Bank No. of...
Transcript of Dr. AtiurRahman Former Governor, Bangladesh Bank Dr. M ... · Source : Bangladesh Bank No. of...
PROMOTING INNOVATIVE FINANCING MODELSFOR SMES:
THE BANGLADESH EXPERIENCEDr.Atiur Rahman
FormerGovernor,BangladeshBank&
Dr.M.AbuEusufChairman,DepartmentofDevelopmentStudies
Director,CentreonBudgetandPolicyUniversityofDhaka
Presented at the “Workshop on small and medium enterprises’ access to finance and the role of developmentbanks in Asia and the Pacific and Latin America” on 27 September 2017 at United Nations Conference Center,Bangkok, Thailand
Research Collaboration with
Centre on Budget and Policy, University of Dhaka
TALKING POINTS
• DevelopmentalRoleofBanks
• FinancingSMEsinBangladesh
• TheSharedRoleoftheCentralBankandtheCommercialBanksinPromotingWomenEntrepreneurship:SummaryofSurveyFindings
• WayForward
DEVELOPMENTAL ROLE OF BANKS
DEVELOPMENTAL BANKING:OUR PHILOSOPHY
Sustainable&inclusive
development
Sustainable&inclusive
development
Channelizingfundstotheground
Channelizingfundstotheground
Diversifyingdeliverychannels
Diversifyingdeliverychannels
Innovative&inclusivefinancialproducts
Innovative&inclusivefinancialproducts
• Bangladeshisbeingpraisedforitsinnovativefinancialinclusionstrategy
• Thecentralbankofthecountryhasbeenleadinginbringingmotivationalchangesamongstbankersandothersinvolvedinthefinancialsector.
SMEFINANCING:ACORE COMPONENT OF DEVELOPMENTAL BANKING
EnsuresaccesstofinancefornewentrepreneursEnsuresaccesstofinancefornewentrepreneurs
CreatesemploymentopportunitiesformanyCreatesemploymentopportunitiesformany
Resultsinresilience(tofinancialshocks)Resultsinresilience(tofinancialshocks)
Contributesinachievingmacroeconomictargets.Contributesinachievingmacroeconomictargets.
FINANCING SMES INBANGLADESH
CHARACTERISTICS OFSMEFINANCING IN BANGLADESH
Areaapproach&clusterbasedfinancing
Dedicatedrefinancescheme
20%ofthetotalcreditforMSME
10%ofMSMEcreditforwomen
Dedicatedhelpdeskforwomen
CURRENT STATUS OF OVERALL SMEFINANCING
Source:BangladeshBank
‐20,00040,00060,00080,000100,000120,000140,000160,000
2011 2012 2013 2014 2015 2016
YearwisecumulativedisbursedamountofCMSMEcredit(figuresincroreBDT) Upto2016,
cumulativeamount
disbursedisaround142thousand
croreBDTandno.of
accountsisover630thousand
CURRENT STATUS OF WOMEN SMEFINANCING
‐
1,000
2,000
3,000
4,000
5,000
6,000
2011 2012 2013 2014 2015 2016
YearwisecumulativedisbursedamountofwomenCMSMEcredit(figuresincroreBDT)
Upto2016,cumulativeamount
disbursedisover5
thousandcroreBDTand
no.ofaccountsisover40thousand
Source:BangladeshBank
BANK‐MFIPARTNERSHIP FORINNOVATIVE SERVICE DELIVERY
BANK‐MFILINKAGE:THE CONTEXT
• TherearestillsubstantialsegmentsofpotentialclientswhoarebeyondthereachofMFIs.
• Inadequatefundingisregardedtobethemostimportantreasonbehindthis.
• Conversely,formalfinancialserviceprovidersarenotinthepositiontodirectlyreachthemicro‐creditclients.
• Hence,linkingMFIswithscarcefundandBankswithexcessliquidityappearedasaprudentsolution.
BANK‐MFILINKAGE:CURRENT STATUS
Sl. NameoftheOrganisation
BillionTk.
1. BRAC,Dhaka 40.532. BUROBangladesh 11.863. TMSS 2.964. BEES 2.095. UDDIPAN 2.036. PMUK 1.807. RDF 1.458. SFDW 1.399. RRF 0.7610. ECB 0.69
Others 12.33Total 77.89
8.99
16.49
0.55 0.457
23.64
2.44
12.84
0.56 0.31 0.14
6.43
2.98
0
5
10
15
20
25
LocalBank
Int'lDonor
INGO LocalNGO
PKSF Others
2002 2015
LoanofMFIsfromlocalbanks Shareofexternalsourcesintotalfund(%)
Source:CDF(2002,2016)
LOAN TO SHARECROPPERS:AGOOD EXAMPLE OF BANK‐MFIPARTNERSHIP
Source:BangladeshBank
BBchannelsBDT6billiontoBRACforcreditprogramforsharecroppers(cumulative3,000+croreBDTbetween2009‐16).
319thousandsharecroppersfrom46districtstobecovered(59%borrowersarewomen)
BRACborrowsfromBBat5percentinterestrate,deliverscollateralfreeloantosharecroppersat10percentinterestrate
Reduceddependenceoninformalmoneylenders;higherextentofpositivechangereportedcomparedtoMFIclients
AGENT BANKING:THE NEWWAY OF BANKING
AGENT BANKING:COST SAVING APPROACH TO REACH THE UNBANKED
Source:BangladeshBank
No.ofAccounts TotalOutstanding(incroreBDT)
544,536
712,499872,865
380.68481.38 651.21
AgentbankinginBangladeshisflourishingasbankshaveaccepteditasacostsavingapproachtoreachtheunbanked.Thisisalsoabankledmodelthatreliesheavilyonuseoftechnologyincludingcorebankingsolutions.
AGENT BANKING:COST SAVING APPROACH TO REACH THE UNBANKEDAgentbankingsuitsmostthecustomersnoteligibleformicrocredit,butalsonotbigenoughformainstreamfinance.
Example:4.5millionRMGworkers(only5%ofthemsavethroughformalchannels).
Combinationofe‐commercewithbiometricidentificationhascreatedthisuniquescope‐ Thoseusuallyafraidofgoingtoabankbranchnowhavetheserviceattheirdoorsteps. Positivechangeinsavingsbehavior(creatingscopeoffutureentrepreneurship). Agentsthemselvesarealsoearning.
Source:TheWallStreetJournal[http://partners.wsj.com/metlife/multipliers/articles/agents‐of‐change/]
THE SHARED ROLE OF THE CENTRAL BANKAND THE COMMERCIAL BANKS IN PROMOTINGWOMEN ENTREPRENEURSHIP:SUMMARY OF
SURVEY FINDINGS
CENTRAL BANK‐COMMERCIAL BANK LINKAGE:THE CONTEXT
• TheCentralBankhastakenanumberofpolicyandprogrammaticinterventionstosupportandpromotethewomenentrepreneurs.
• Akeyfocushasbeentocreateincentivesforthecommercialbanksothattheycanfacilitatewomen’saccesstocredit.
• Anenablingenvironmenthasalsobeenpromoted• Efforthasbeentakentodevelopasenseofsharedresponsibilitywhereboththeentitieswillworkincollaborationtopromotewomenentrepreneurship
THE FOCUS OF THE STUDY• The study has been carried out by the Centre on Budget and Policy atthe University of Dhaka with the support from the Asia Foundation.
• The major focus of the study is to explore whether this collaborativeeffort (between the Central Bank and the Commercial Banks) haspositively affected women entrepreneurs
• To that end, emphasis has been placed on finding answers to thefollowing three questions‐
• What are the key barriers faced by the women entrepreneurs in gaining access tomarket and becoming engaged in different business ventures?
• How effective is the collaborative effort in addressing these barriers?• What more can be done?
THE FOCUS OF THE STUDY…
• The study, therefore, focuses both on the demand (womenentrepreneurs) and the supply side’s (commercial banks) perspective
• Try to find out the equilibrium• Explore the role of District Women Business forums in generating theequilibrium
METHODOLOGY
• A mixed‐method approach• To understand the demand side’s perspective‐
• 300 women entrepreneurs have been randomly selected and surveyed• The participants have been selected from six divisional districts of Bangladesh
• To understand the supply side’s perspective• Key Informant Interviews and FGDs have been done with the Central Bank and the Commercial Bank officials (from six divisional districts)
• National level Central Bank officials have also been interviewed• To explore the role and performance of District Women Business Forums
• Key Informant Interviews and FGDs have been conducted in five districts‐ Barisal, Khulna, Rajshahi, Rangpur and Sylhet
• Both the leaders (Presidents, Vice‐Presidents) and the General Members have been interviewed
CHARACTERISTICS OF WOMEN ENTREPRENEURS
YoungwomenaregettinginterestedinSMEs.YoungwomenaregettinginterestedinSMEs.
EducatedwomenaregettinginvolvedinSMEs.EducatedwomenaregettinginvolvedinSMEs.
Over85%ofwomenenterprisesaresoleenterprises.
Over85%ofwomenenterprisesaresoleenterprises.
The thrust for economic solvency has engaged women in SMEs.
The thrust for economic solvency has engaged women in SMEs.
About 81% women entrepreneurs have bank account.
About 81% women entrepreneurs have bank account.
Source:CBP‐TheAsiaFoundationSurvey,2016
DEMAND SIDE PROBLEMS
Improved overall knowledge though the pace of this improvement is not satisfactory
Improved overall knowledge though the pace of this improvement is not satisfactory
lack of financial capital as the key barrierlack of financial capital as the key barrier
lack of knowledge and information (33% never heard about help‐desk and only 18% knew about helpline support)
lack of knowledge and information (33% never heard about help‐desk and only 18% knew about helpline support)
19% of the women entrepreneurs have not opened any bank account
19% of the women entrepreneurs have not opened any bank account
Hesitant in getting loan from banks, only 48% have applied for loan
Hesitant in getting loan from banks, only 48% have applied for loan
Lack of experiences,focus on some specific business ventures
Lack of experiences,focus on some specific business ventures
Source:CBP‐TheAsiaFoundationSurvey,2016
SUPPLY SIDE PROBLEMS
Inadequate policy frameworkInadequate policy framework
Requirement of guarantors Requirement of guarantors
Absence of monitoring frameworkAbsence of monitoring framework
High interest rateHigh interest rate
Issues related with collateralIssues related with collateral
Negative attitude of commercial banks about women entrepreneurs
Negative attitude of commercial banks about women entrepreneurs
Source:CBP‐TheAsiaFoundationSurvey,2016
CAN DISTRICT WOMEN BUSINESS CHAMBERS BRIDGE THEGAP:AN ANALYSIS OF THEIR PERFORMANCE
• The district women chambers have adequate knowledge aboutgovernment services and initiatives and provide the womenentrepreneurs with necessary information
• Have limited success in connecting the women entrepreneurs withbanks
• Capacity to influence policy and programs is quite limited• Limited interaction with national level policy making bodies
Summary of the Problems
• Three Broad Types• Capacity related problems: capacity of the individual entrepreneurs needs to be strengthened significantly.
• Policy related problems: Policy interventions should be there which would allow women entrepreneurs to deal with problems related with guarantors and collateral.
• Implementation related problems: Our study also indicates that developing a ‘good’ policy is never enough unless and until the implementing partners and agencies understand their duties and responsibilities properly.
WAY FORWARD:RECOMMENDATIONS
PROBLEM SPECIFIC RECOMMENDATIONS
• Capacity Development‐• Efforts to build the capacity of the women entrepreneurs should continuewhere the women chambers can take the lead
• The chambers should also organize regular view‐exchange meetings to helpthe women entrepreneurs understand the loan‐getting procedure, tointroduce them with different institutions, and to connect them withorganizations which can in future fund their business initiatives.
• Policy Issues• The women chambers can take the lead and they may analyze the currentinitiatives to identify the limitations, suggest specific policy measures andlobby the government agencies to initiate policy changes.
PROBLEM SPECIFIC RECOMMENDATIONS …
• Implementation‐related Problems• The central bank can take the initiative to introduce a target‐based approach,where targets will be set for the commercial banks for each month (i.e. targetcan be related with number of loans approved, number of womenentrepreneurs assisted etc.);
• At the local level (possibly at the district or sub‐district level), a separateinstitutional arrangement can be established
• to monitor the activities of the commercial banks• To evaluate whether these banks have managed to reach the agreed upon target and ifnot, why.
• This organization will then report to the national level and may suggest actions thatwould enhance women’s access to credit.
CREDIT GUARANTEE SCHEMES:MITIGATING THE RISKS
• Creditguaranteeschemesneedtobeinplacetoaddresstherisks.• Thereshouldbeallocationsinthenationalbudget.• TheCentralBankcanleadtheendeavor.
• ExperiencefromMalaysia(CreditGuaranteeCorporation,CGC)canhelpothercountrieslikeBangladesh.
• MultilateralorganizationslikeWorldBank,ADBcanprovidenecessarysupport
PROMOTING INNOVATION &LEARNING BY DOING• Surely, Bangladesh has come a long way in promoting SMEs:‐ SME foundation also complementing in promoting SME development,‐ regular women entrepreneurship fair,‐ regular road shows by the Central Bank
• Wehavefollowedthe“learningbydoing”.
• Nowitistimetoscaleupandtocollaboratewithaviewtomaximizethebenefits.
• Dialoguebetweenstakeholdersfromandbeyondthecountrymustcontinuebecauselearningisaneverendingprocess.
INTEGRATING LOCAL INSTITUTIONS
• Theroleoflocalinstitutionsinpromotingwomenentrepreneursiswellacknowledged.
• The association of women entrepreneurs can play important rolein building network with the financial, regulatory, and othersupportive institutions.
• During policy preparation, the engagement of local institutionsshould be ensured.