SME default loans rise eightfold in 7yrs: study

Default loans in the SME sector have increased by more than eight times in the last seven years, a survey revealed yesterday.

In 2016, Tk 22,494 crore out of the Tk 136,176 crore disbursed by banks became defaulted; the amount of such default loans was only Tk 2,644 crore in 2010.

The default loan in the small and medium enterprise sector reached Tk 11,061 crore in 2014 and Tk 18,342 crore in 2015.

The Bangladesh Institute of Bank Management (BIBM) conducted the survey and released the research paper titled “Impact of SME financing on banks' profitability: An inquiry across banks in Bangladesh” at a seminar at the institute.

Md Masudul Haque, an assistant professor of the BIBM, presented the findings of the survey. Khondkar Ibrahim Khaled, a former deputy governor of the Bangladesh Bank, presided over the programme. 

SME financing does not contribute much to banks' profit, said SK Sur Chowdhury, a deputy governor of the BB. “But banks will have to concentrate more on the sector as SMEs will turn into big businesses in future,” he said.

Chowdhury said banks will have to meet their SME financing target. He urged banks to introduce collateral-free loan products for SMEs to support new entrepreneurs.

It should be strictly monitored to check whether the disbursed loan is being used properly, said Moshiur Rahman Chowdhury, managing director of AB Bank.

Arif Khan, managing director of IDLC Finance, said his non-bank financial institution has lent over Tk 3,000 crore to the SMEs, of which only 2 percent is nonperforming.