SME neglected in foreign trade finance: Study

The SME sector in the country can avail of loans from banks but is neglected in getting finance for foreign trade whereas the sector can play a major role in boosting exports and overcoming the ongoing dollar crisis, said experts.

"When we talk about SME finance, foreign trade finance does not come in that way. Banks have created separate desks for SME loans but there is no place for such desks in export-supported trade finance," said Professor Shah Md Ahsan Habib of the Bangladesh Institute of Bank Management (BIBM) while presenting a research report. 

He presented the report titled "International Trade Finance and SME: Bridging the Gap" at a seminar held at BIBM on Monday.

Mentioning that loans are given to big exporters in trade finance, he said those who are big exporters, get support from trade finance, but small SMEs do not get any loans. As a result, these businessmen have to take the help of other big businessmen in exporting goods. 

"We have seen the same trend in the RMG sector as well. At present, we need to prioritise trade finance for the SME sector at the policy level. Some facilities should be provided for them so that the sector can contribute to the country's economy," he added.

The report highlighted that the rejection of export applications was a major hurdle for SME entrepreneurs. Five reasons for the rejection have been mentioned – 36% of loan applications were rejected due to lack of collateral, 18% due to high interest rates, 17% for lack of previous transaction information, 11% for high risk and 10% for lack of sufficient documents. 

The report is based on the data of five state-owned banks, two foreign banks and 23 private banks.

According to the perceptions survey outcome, 67% of banks claimed they had rejected 10%-20% of SME applications whereas 33% of banks claimed they had rejected 20%-40% of the SME/CMSME applications of trade finance during 2022. The challenges of woman entrepreneurs appear to be even higher.

As the chief guest of the event, Bangladesh Bank Deputy Governor Kazi Sayedur Rahman said SME entrepreneurs play an important role in economic and social development, especially in poor and least developed countries. 

Exporting products directly to foreign markets by SME entrepreneurs can contribute to the economic development of the country.

BIBM's Supernumerary Professor Abduch Salam Azad, BIBM Associate Professor and Director (Research, Development and Consultancy) Ashraf Al Mamun, and BIBM Director General Md Akhtaruzzaman were present at the event.