Micro enterprises to get nearly 7m pounds challenge fund

The Business Finance for the Poor in Bangladesh (BFP-B), a five-year programme funded with UK aid, will leverage private sector funding worth Tk 333 crore or £34 million to develop the country's micro and small enterprises (MSEs).

Private companies can now submit business concepts to avail funds from the project.

The information was shared yesterday at a roundtable on “Facilitating convenient access to finance for MSEs in Bangladesh: Early signs of impact of challenge fund projects”.

Business Finance for the Poor in Bangladesh and The Daily Star jointly organised the event at The Daily Star Centre in Dhaka.

At the event, analysts shed light on the third round of the fund that was launched on May 23 this year.

The last date for the submission of business concepts ends on June 30 this year.

Currently, 16 projects are underway from two rounds of the challenge fund where around £2 million has so far been disbursed out of the total commitment of £7 million, said Arafat Hossain, Challenge Fund Manager.

Around1.8 lakh MSEs are expected to have access to finance and financial services by the end of the project, he said.

“We are encouraging private sector companies registered in Bangladesh to apply for the fund.”

A huge segment of the rural people still does not have access to financial services, said SK Sur Chowdhury, deputy governor of Bangladesh Bank.

The challenge fund has come forward at a time when banks are intentionally refraining from providing rural people with loans because of repayment risks, he said.

The challenge fund would work as a good substitute for collateral, Chowdhury said.

The fund would be very helpful to provide the unbanked with financial services by reducing the cost of financial inclusion, he added.

Agent banking can be a good solution for the banks to reach the remote people, he suggested.

The challenge fund has invested in Diganta, an agent banking led financial programme of Bank Asia for micro and small enterprises, according to the project.

The project aims at rapidly extending funds to such enterprises with agent touch points.

Bank Asia targets reaching 10,000 entrepreneurs through its agent banking network with an investment of Tk 300 crore, said Md Arfan Ali, the bank's managing director.

Bank Asia has been working on creating a database of the small enterprises for the last one and a half years, he said. It has digitalised the lending process, as the cost for making physical movement to reach the poor is very high, he said.

The challenge fund also invested in different projects of Trust Bank, Dutch-Bangla Bank,Bangladesh SME Corporation and Green Delta Insurance.

Bangladesh Bank is the implementing agency of the  BFP-B programme and the financial institutions division of the finance ministry is the executing agency.

Nathan Associates London in consortium with its partner Oxford Policy Management is the management agency of the fund.

It is designed to couple social and economic welfare objectives through the Making Markets Work for the Poor approach to increase access to finance for small entrepreneurs, especially who are currently underserved by the formal financial sector.

Parveen Mahmud, chairman of MIDAS, and KAM Majedur Rahman, managing director of Dhaka Stock Exchange, also attended the event.

Ms Afsana Islam, Private Sector Development Adviser, Growth and Private Sector Development, DFID Bangladesh, also spoke at the event.

Dr Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development was the moderator of the programme while Dr Ahsan H Mansur, executive director of the Policy Research Institute, was also present, among others.