Lion's share of SME loans goes to traders
As much as 63 percent of the SME loans disbursed in the first nine months of the year went to the trading sector, neglecting the manufacturing zone in the process.
In the first nine months of the year, Tk 77,718 crore of SME loans was disbursed to the trade sector, up 20.28 percent year-on-year.
"It is not a good indication at all that a lion's shares of SME loans have been disbursed in the trade sector," said Salehuddin Ahmed, a former governor of the Bangladesh Bank.
The manufacturing sector accounted for 24.02 percent of the total SME loans disbursed during the period and the service sector 12.81 percent.
Between the months of January and September, banks and non-bank financial institutions managed to disburse 92 percent of their SME target for the year. The target was Tk 133,853 crore.
"The central bank should investigate whether the disbursed loans had actually gone to the SME sector," Ahmed said.
The banks might have showed other disbursed credit as SME loans as clients are allowed to take about Tk 10 crore from banks in the name of investment in small and medium enterprises.
"Banks prefer the trade sector as it is relatively less risky than the manufacturing sector."
The former BB governor went on to urge banks to bump up their loan disbursement to the manufacturing sector as employment generation will give a boost if the sector enjoys sufficient credit.
The economy will not benefit if the majority of the loans go to the trade sector, said AB Mirza Azizul Islam, a former finance adviser.
Banks have recently given importance to disbursing SME loans to avoid default loans, said Shafiqul Alam, managing director of Jamuna Bank.
He however acknowledged that banks sometimes show reluctance to disburse loans to the manufacturing sector on the ground that they have large amounts of capital expenditure.
Comments