Brac’s SME banking changed crores of lives
Syed Abdul Momen, deputy managing director and head of SME Banking at Brac Bank PLC, discusses how the organisation and its innovative financing packages has helped small businesses thrive amid economic challenges in the country in an interview with The Business Standard
What are your achievements related to CMSME till now? What could you have done better?
Our visionary founder, Sir Fazle Hasan Abed, established this bank to take banking services to the unbanked 'missing middle'. Since its inception in 2001, Brac Bank has been playing a leading role in ensuring easy access to credit for smallholder businesses, especially in semi-urban and rural Bangladesh.
Today, Brac Bank is Bangladesh's largest collateral-free financier for cottage, micro, small, and medium enterprises (CMSMEs), with more than 85% of its loans without any mortgage. Till now, we have disbursed Tk154,694 crore to around 16 lakh CMSME customers. This has had a positive impact on crores of lives comprising their families and staff.
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Our ultimate goal is bigger than being a mere lender though; we aspire to be the comprehensive banking and financial partner for grassroots entrepreneurs.
Brac Bank's commitment to clients goes beyond traditional banking. We provide comprehensive support, including capacity building, networking, and market access facilities. Our skill development programs, such as' Uddokta 101' and 'Amrai TARA', equip business owners with the knowledge and skills they need for entrepreneurial success. We are also expanding into unbanked segments through our innovative digital financial solutions, such as Shafollo, Jibika, and Shabolombi.
We have a long way to go to bring all enterprising CMSME entrepreneurs under the purview of the formal financial system. If we had digital infrastructure like the ones we presently have — Astha, eLAP, Shafollo, Jibika, etc. — we could have reached out to more entrepreneurs in remote parts of the country. Digital solutions make banking services faster, cheaper, and more accessible for CMSMEs.
Transitioning SMEs from traditional to digital is the greatest challenge. In the banking industry in Bangladesh, major digital transformation projects are concentrated on Retail and Corporate businesses. The SME sector has a long way to go to catch up with the digital transformation journey going on in the overall banking sector. A technological overhaul is the cornerstone of SME banking's growth.
Where do you plan to take Brac Bank's SME business in the next five years? How confident are you?
Since 2022, Brac Bank has adopted a growth strategy to double its business within 2025. SME business is central to the growth strategy as SMEs constitute more than 50% of our asset book. Accordingly, SMEs have been achieving nearly 30% growth over the last couple of years. Brac Bank aspires to become the largest SME bank in the country, leveraging its two decades of experience, expertise, and advanced technology.
Brac Bank is deeply committed to providing easy access to finance to the grassroots-level CMSMEs. As of December 2023, our SME loan portfolio stood at Tk26,250 crore, and SME deposit portfolio at Tk9,324 crore, achieving a remarkable 27% and 39% growth respectively.
This is a testament to our ambitious growth strategy, which we are determined to continue in the years to come. Currently, we hold a 15.6% share of the country's total SME financing by private commercial banks, a figure that is set to rise significantly in the next five years.
Banks have progressed digitally, but the SME segment still needs to catch up. What are your plans related to SME digitisation?
Transitioning SMEs from traditional to digital is the greatest challenge. In the banking industry in Bangladesh, major digital transformation projects are concentrated on Retail and Corporate businesses. The SME sector has a long way to go to catch up with the digital transformation journey going on in the overall banking sector.
A technological overhaul is the cornerstone of SME banking's growth. Our data substantiates this, showing that it has significantly improved the customer journey, accelerated processes, and enhanced convenience. Consequently, our division has been diligently implementing and prioritising the digitisation of SMEs.
The bank rolled out digital SME loan processing nationwide through the SME Loan Origination System (eLAP). This simplifies the loan application process, ensuring increased people productivity and reducing loan processing lead time.
The bank launched the country's first document-less real-time digital SME Loan, Shafollo, and digital loan for individuals, Jibika, to provide greater access to finance in marginal areas of the country. This has enabled the bank to penetrate areas not previously touched.
Brac Bank will undertake a holistic tech-led transformation of existing processes and products, which will allow faster processing and significantly reduce the cost of service.
It aims to transform SME business by leveraging digital to provide comprehensive banking services to diversified segments within the CMSME sector across Bangladesh. Transformation of products and processes through digitisation, customer-centric and innovative products, and exploring opportunities beyond traditional boundaries will be key to growing business at scale in SME frontiers.
