1.

1: Background of the study

SME means Small and Medium Enterprises. It is now increasingly renowned that the
Small and Medium Enterprises play an important role around the world. Small and
medium-sized enterprises are measured to be one of the principal driving forces in
economic development. They encourage private ownership and entrepreneurial skills,
the greater likelihood that SMEs will utilize labor intensive technologies and thus
have an immediate force on employment generation, they can usually be established
rapidly and put into operation to produce quick returns, SME development can
encourage the process of both inter and intra regional decentralization and they may
well become a countervailing force against the economic power of larger enterprises.
More generally the development of SMEs is seen as accelerating the achievement of
socio-economic objectives, including poverty alleviation and help in diversification of
economic activities
SMEs occupy a unique position in the economy of Bangladesh. Mainly private sector
development depends on them. In Bangladesh the SMEs explanation for about 45% of
manufacturing value addition. They account for about 80%of industrial employment,
about 90% of total industrial units and about 25% of total labor force. Their total
contribution to export earnings varies from 75-80%.The total number of SMEs is
estimated at 79754 establishments, of which 93.6% are small and 6.4% are medium
which contributed around 20-25% of GDP. Small and medium enterprises (SMEs)
make up the largest portion of the employment base in many developing countries
and, indeed, are often the foundation of the local private sector. Now the SMEs are
not only determined to low-tech, traditional, and agro-based economic activities; these
are spread over other non-traditional manufacturing and service sector as well. The
entrepreneurs behind should play a much larger role in development, but too often are
held back by a lack of ready access to financing from local formal sector financial
institutions. Here lies the scope of commercial banks to offer banking facilities to this
„missing middle‟ by offering different products that are specially featured for this
segment. On a long term perspective these commercial banks expect to gradually
develop the creation of an entrepreneurial class across Bangladesh through proper
financing and training. Commercial banks are also developing their procedure and
operational guideline supported by structured recruitment process and subsequent
training with a view to mitigating credit risks and 10 other risks for a smooth flow of

1
SME financing. Most businesses in Bangladesh are in need of small short-term loans
to help finance their working capital needs or purchase of fixed assets.
Acknowledging the importance of SMEs and entrepreneurship, the Government of
Bangladesh reaffirming their commitment takes initiative to design SME policies and
strategies for its coherent growth .After the birth of Bangladesh, intensive efforts were
undertaken to accelerate the rate of industrialization in the country. In order to attain
this objective, large amount of industrial credit was funneled to the industrial sector.
But the whole exercise of industrialization came to a close down with the massive
diversion of resources to other non priority sectors. Policy makers, of late, have come
to recognize the contribution of SME sector towards economic development in the
country. As a developing country our country are facing a large number of problems
such as high population growth and lack of rural industrialization, unemployment and
underemployment of human and materials resources, unbalanced regional
development etc. The contribution of small and medium enterprises in the solution of
these problems is beyond doubt. If small and medium enterprises are through
organized and scientific way it will bring the desire outcome like the blessing for the
densely populated country Bangladesh. SME can play a great role by providing the
employment facility of the major part of our civilization and easily can remove the
curse of unemployment problems.

1.2: Problem statement

Small and Medium Enterprise contributes significantly in the field of Bangladesh‟s
GDP and export earnings. They have always been short of business support and
regulatory and financial assistance. The financial sector has been given that only 10
percent of their overall credit to SMEs. The commercial banks provide credit only to
their well established and large scale trading and manufacturing customers, because it
is easy to handle and expedient to support for them. The main objective of our report
is to find out the contribution of banks on SME sector in Bangladesh.

2
1.3. Objectives of the Study

General research objective: The broad objective of the study is to assess the role of
Commercial Banks on the success of Small and Medium Enterprises in Bangladesh.

Specific research objectives:

 To identify the role of public commercial banks in small and medium
enterprises;
 To examine the role of private commercial banks in small and medium
enterprises;
 To identify the factors that influence operations of small and medium
enterprises;
 To find out the problems of commercial banks in contributing in SMEs

sector;

 Finally, to make some recommendations towards the policy makers of

private and public commercial bank for the development of SMEs in
Bangladesh.

1.4 Scope of the Study

To make a standard report, relevant documents and papers are collected from the

various commercial banks. Government and private banks helped us to prepare a

constructed report by providing relevant papers, annual reports and access to files

which makes the report enriched. The study focused on Rangpur region because it is

one of the largest sector of small and medium enterprises in Bangladesh. Furthermore

the study is confined to these selected areas because of time and financial constraints.

3
1.5 Limitations of the Study

The following factors were acted as obstacles to prepare this report:

 The main Limitation of this report is that it‟s not possible to disclose all data
and information for the reason of confidentiality.
 Update information is not available in the official websites and the journal of
Bangladesh Bank which facilitates to prepare of the report.
 There was significant lack of information from secondary reports. As a result,
primary data had to be collected from our survey, as well as face to face
interviews with different bank officials and entrepreneurs.
 Interview may consist with biasness because many of the interviewees were
reluctant to state whether they had a major problem in any specific category. .
 Discussion about the Small and Medium Enterprises is a vast subject, but only
some selected areas are covered in the research paper.
 Bankers did not provide sufficient information during interview because
bankers were busy with their job and fell bore to give us enough time.
 Many interviewees doubted about the outcome of research work.

4
2.1 Literature review

This chapter specifically reviews the literature on SMEs, Contribution of financial

institutions, Present Scenario of SMEs.

Aminul. (2011) reported that the characteristic of entrepreneur is found to be a

significant factor for business success of SMEs in Bangladesh. He found that the
study is based on survey methodology through a questionnaire administered on the
owners and employees of small firms. He described these things on his article, “Effect
of Entrepreneur and Firm Characteristics on the Business Success of Small and
Medium Enterprises (SMEs) in Bangladesh”. Aminul. (2011)

Ayyagari describes a new cross-country database on the definition of SMEs across

different countries, allowing importance of small and medium enterprises (SMEs). it
extends construction of the different indicators, presents coverage to a broader set of
developing and industrial descriptive statistics, and explores correlations with other
economies. It provides information on the socioeconomic variables in contribution of
the SME sector using a uniform. Meghana Ayyagari describe these in the name of
articles, “Small and Medium Enterprises across the Globe”. Ayyagari (2003)

Journal of Business Ethics reported that the impact of smaller firm size on corporate
social responsibility (CSR) is ambiguous. Some contend that small businesses are
socially responsible by nature, while others argue that a smaller firm size imposes
barriers on small firms that constrain their ability to take responsible action. This
paper critically analyses recent theoretical and empirical contributions on the size–
social responsibility relationship among small businesses. More specifically, it
reviews the impact of firm size on four antecedents of business behaviour: issue
characteristics, personal. A survey of “Investigating the Impact of Firm Size on Small
Business Social Responsibility: A Critical Review”. Journal of Business Ethics (2006)

With respect to the SME sector of Bangladesh, foreign and national experts undertook
some studies. Some of the notable ones are; Uddin (2008), Chowdhury (2007), Miah
(2007), Ahmed (2006), MIDAS (2004), ICG (2003), Hallberg (2002).

Uddin (2008) has stated that the economic efficiency and overall performance of the
SMEs especially in the developing countries are considerably dependent upon
macroeconomic policy environment and specific promotion policies pursued
for their benefit.

5
Chowdhury (2007) highlighted that in context of Bangladesh SME is characterized by
Low capitalization and limited assets, geographical diversity and high mortality, poor
credit knowledge, very limited access to formal source of credit, cash intensity in
transactions, very limited record keeping habit, poor financial disclosure on account
of tax issues, high risk perception has led to high borrowing costs.

In a study about SME sector of Bangladesh Miah (2007) stated that the major
constraints for SMEs are lack of adequate investment, lack of modern technology,
high rate of interest on bank loans, irregular/inadequate supply of power, poor
physical infrastructure and high transportation cost, poor information about market
opportunities and requirements, inadequate availability of raw materials, lack of
skilled technicians and workers, lack of research & development facilities, fierce
competition, absence of effective and transparent legal system, difficulties in
accessing technology, credit constraints, low access to business services, constraint of
quality of human resources, low awareness, low lobbying capacity, rapid changes in
policy environment.

Ahmed (2006) observed that availability of finance is a major constraint to formation

and growth of SMEs in Bangladesh. Banks are reluctant to expand their SME credit
portfolio because they do not consider SME lending an attractive and profitable
undertaking. This is so because SMEs are regarded as high risk borrowers because of
their low capitalization, insufficient assets and their inability to comply with collateral
requirements of the banks.

In a study in Australia, McMahon (2001) discovered that greater dependence upon

external finance associated with better business growth. In a more recent study, in
Indonesia, Kristiansen, Furuholt, & Wahid (2003) found that financial flexibility was
significantly correlated to business success. The SMEs that took advantage of family
and third-party investment experienced higher level of success.

Size of enterprise reflects how large an enterprise in employment terms. McMahon

(2001) found that enterprise size significantly linked to better business performance.
Larger enterprises were found to have a higher level of success.

6
3.1 Methodology
Methodology is the most important component in any study proposal since it explains
the procedures and methods through which a particulars study carried out. The study
is based on secondary data mainly Secondary data derive from publications of
Bangladesh bank and statistical data from reliable and organized sources, In this
regard several books, articles and some newspapers have been reviewed to get idea
about the topic. This chapter includes discussion are data requirements, Sample size
selection/determination, data analysis, limitations etc.

3.2 Research Design

Research design is the blueprint for conducting the research. The details of the
procedures necessary for obtaining the information needed to structure or solve
research problem. so for conducting this research we draw a design by following way:

Data is the first and foremost for any study. Relevant data were collected from both
secondary and primary sources. Secondary data were collected from the annual
reports (2016) of the selected Government & non-government banks and from
Bangladesh banks reports on SME and SME organizations in Bangladesh. These data
were reviewed and analyzed after collection. Primary data is mainly in 2(two) types-
Quantitative and Qualitative data. Qualitative Data mainly collected by conducting
some interviews with SME Bankers and selected SME Entrepreneurs. Quantitative
data were get through conducting survey through selected Questionnaire. Interview
technique approach has used in the questionnaire. The questionnaire prepared for the
interviews was structured and easy to understand.

3.3 Study Area

The SME firms comprises whole over the country. Due to short period of time and
convenient of the study, Rangpur region has been selected for the study. This area is
the concentration of Banks and some portion of SME firms.

7
3.4 Sample size selection/determination
Out of 54 commercial banks, 39 banks are Private commercial banks, 6 banks are
state owned commercial banks and 9 banks are foreign commercial banks. In our
study, 4 banks have been selected purposively. Among these 2 Government Banks are
Sonali Bank Limited and Janata Bank Limited and 2 Private commercial banks are
Jamuna Bank Limited and Pubali Bank Limited. These banks have been selected
because these banks contribute comparatively more than the other commercial banks
in the SMEs sector. To select the sample, convenience sampling method was used in
order to minimize bias. According to SME and Special Program Department SPD,
Bangladesh Bank, at present, the total number of SMEs is estimated at 79754
establishments, of which 93.6% are small and 6.4% are medium. For conducting
research we have purposively chosen 24 SME entrepreneurs.

3.5 Tools and technique of data collection

 The Primary Sources

 The Secondary Sources

3.6 The Primary Sources

Data collected from practical field is called primary data. In the study following
primary data sources have been used.

 Face-to-face conversation with the respective SMEs entrepreneur and Bank

Officials.
 Informal conversation as well as a direct interview with SMEs entrepreneur
 Relevant file study as provided by the owners of SMEs concerned.

8
3.7 The Secondary Sources

Data collected by someone other than the user in various sources is called secondary
data. In this Study the following secondary data sources have been used.

 Annual report and periodical publications.

 Different publications, Newspapers.
 The internet will also be used as a theoretical source of information.
 Bangladesh Bank annual Report.
 Annual report of Sonali Bank Limited.
 Annual report of Janata Bank Limited.
 Annual report of Pubali Bank Limited.
 Annual report of Jamuna Bank Limited.
 The Banking journals, BIBM, Bank bd.org
 Bank economic reviews (Like; Bangladesh Bank, World Bank).
 University research reports.
 Journals and articles are all useful sources to contact.
 Bank progress reports etc

3.8 Questionnaire Development

In the primary interview, two groups of people were interviewed. One group consists
of 18 bankers from two government and two private banks. Another group consists of
24 entrepreneurs of SMEs. The bankers argued that banks have an important
contribution in the development of SMEs sectors in Bangladesh though these have
much scope to expand their contribution to this vital sector. From the interview of
bankers the following issues are come out that has a great contribution in the
development of SMEs sector in Bangladesh.16Near about 60% loan is provided by
Bank in SME sector. Banks provide non financial support like SME training,
awareness program etc beside the financial support. Banks has convenient structure,
policy, and guideline regarding SME loan. On an average banks provide near about
15% loan in SME sector from their total loan disbursement each year. The SME loan
processing by bank is more convenient than other financial institutions. Bangladesh
Bank gives a target to each commercial bank to provide loan in SMEs sector since
2010. Bangladesh Bank said that loan is provided at 10% interest rate in SMES sector

9
but in reality public banks are providing loan at about 14 to 15% interest rate and
private bank is providing 18 to 19 percent interest rate. SME foundation claim that
loan is provided at single digit interest rate but it does not prevail in reality. Near
about 16.16% SME entrepreneurs are satisfied taking loan from banking sector.
During the interview of second group (SME entrepreneurs) they said how banking
industry play a vital role in the development of SMEs sector in Bangladesh. From the
interviews of SME entrepreneurs following issues were identified 62.5% SME
entrepreneur takes loan from banking sector to operate their business. They also get
non-financial supports like SME training, awareness program etc from bank. 12.50%
SME entrepreneur agree that it is easy to take SME loan from bank than other
financial institutions.66.66% entrepreneurs are satisfied by taking loan from
bank.Most of the entrepreneurs prefer to take loan from private commercial bank due
to their convenient loan disbursement process. Some questions were open ended and
attitude rating scale was used for others.

3.9 Classification, analysis, interpretations and presentation of data

Some diagrams and tables were used in this report for analyzing the collected data
and to explain certain concepts and findings more clearly. Moreover, collected data
were analyzed more precisely.

3.10 Findings of the study

The collected data were analyzed well and were pointed out and shown as findings at
the end.

3.11 Final report preparation

The final report is prepared after getting valuable suggestions and advice from my
respected Supervisor.

10
4.1 Introduction

This chapter presents conceptual definitions of small and medium enterprises (SMEs) and

Public and private commercial banks. Literature review is also done on the development of

Public and private commercial on the success of SMEs. The chapter proposes a conceptual

frame work SMEs conditions In our country Bangladesh.

4.2. Definition of Small Enterprise

Small Enterprises are independently owned and operated business, whose owner(s)
exercises close control over operations and decisions. The equity is not publicly
traded and business anally guaranteed by the owner(s). Typically small businesses are
those who employ less manpower and whose asset size is also not big. In most cases
these are not dominant player in respective fields of business. Small Enterprise refers to
the firm/business which is not a public limited company and complies the following criteria:

Serial Sector Fixed Asset other than Employed

No. Land and Building (Tk.) Manpower
(not above)
1 Service 50,000-50,00,000 25
2 Business 50,000-50,00,000 25
3 Industrial 50,000-1,50,00,000 50
Source: Bangladesh bank

4.3. Definition of Medium Enterprise

Medium Enterprises are those, whose asset size and manpower is higher than Small
enterprises but less than local corporate .The Maximum limit of asset and manpower
differs among countries. Local manufacturing units often fall under Medium
Enterprises. According to the Industrial policy 2005, SME definition has been in
terms of fixed assets and no. of employees of three major sectors: service,
manufacturing and trading but the present definition which was recommended by
Better Business Forum and accepted as a uniform one by Ministry of Industry and
Bangladesh Bank included Cottage and micro industry as SME in Bangladesh

11
Medium Enterprise refers to the establishment/firm which is not a public limited company
andcomplies the following criteria:

Serial Sector Fixed Asset other than Employed

No. Land and Building (Tk.) Manpower
(not above)
1 Service 50,00,000-10,00,00,000 50
2 Business 50,00,000-10,00,00,000 50
3 Industrial 1,50,00,000-20,00,00,000 150
Source: Bangladesh bank

4.4 Current Status of SME Financing by Banks in Bangladesh

Janata Bank Ltd. are disbursing significant amount of credit under various programs
like Small Enterprise Development Project, Self-help Credit Program and Project for
Small Entrepreneurs, Special Investment Program and Agro-based Supervisory
Industrial Credit etc for the promotion and development of SMEs. The investment of
private sector banks in financing SMEs remains insignificant in Bangladesh. Of all
the private sector banks like Pubali Bank Ltd., Standard Chartered Bank Ltd., Agrani
Bank, BRAC Bank, Eastern Bank Ltd.(EBL), Prime Bank Ltd, Dhaka Bank Ltd,
Mercantile Bank Ltd, Dutch-Bangla Bank Ltd, Islami Bank Bangladesh Ltd, IFIC
Bank Ltd. have the leading role in SME for Small Industries and Commerce
Bangladesh Ltd.(BASIC) and other government and private banks are entrusted with
the responsibility of providing medium and long-term loans for promotion and
development of small-scale industries. The memorandum and Articles of Association
of the bank stipulates that 50% of loan able funds shall be used for financing small
scale and cottage industries. The outstanding credit of BASIC stood at 1505.06 crore
at the end of June 2016 for small and cottage industries sector.

12
4.5 Factors that influence operations of SMEs.
The factors that influence operations of SMEs are as follows.

Enterprise Density
Enterprise density affect largely on theon the SMEs operations.Enterprise density is
defined as the number of firms in a given population at a given time and refers to the
percentage of existing and possible entrepreneurs (Panco & Korn, 1999:6

Inflation
Highly changeable inflation rate is another major hindrance to operate SMEs
operations easily.

Interest rates
High interest rate is another problem to the required finance in our country
Viviers et al, 2001:4)

Unemployment
Unemployment impacts on the entrepreneurship process (Viviers et al, 2001:4).
Where there is high unemployment a lot of people are pushed into entrepreneurship
for survival (Wickham, 2001:63; Dollinger, 1999:43); at the same time because of this
high unemployment and limited earnings, markets are naturally limited (Ligthelm &
Cant, 2002:5).

Exchange rates
Exchange rates are a major factor in entrepreneurship (Viviers et al, 2001:4; Ligthelm
&Cant, 2002:5). that there is more opportunities in the export market but that there is
less capital for investing in local SMEs.

Public support
The government‟s SME support programmes could ensure that SMEs get ongoing
support in the form of knowledge and expertise to ensure growth of the business
beyond the initial incubation and early survival (Nasser et al, 2003:399; Ligthelm &
Cant, 2002:5). Lack of public sector support has a negative impact on
entrepreneurship development in a country (Clover & Darroch, 2005:244).

Access to labour
Access to labour markets is a key factor of production crucial for entrepreneurship as
it allows for appropriate expertise that enables ventures to explore identified
opportunities (Nasser et al, 2003:399; Markman & Baron, 2003:285. While the
available semi-skilled and skilled labour is expensive (Ahwireng-Obeng & Piaray,
1999:78; Viviers et al, 2001:4).

Location
Geographic location has its implications for access to markets and other resources like
finance, skilled labour, subcontractors; infrastructure, distribution and transport
logistics and other facilities (Tustin, 2001:102; Dahlqvist et al, 2000:5; Berry et al,
2002:22). SME success also depends on neighbourhood appearance and
continued/maintained future business operations in that location.

13
In testimony of this fact, share of Agriculture, Manufacturing industry & Service
Sector in GDP over the period from 2015- to 2016 is shown in the following table

Table 1.1 Industrial Origin Sector in million Tk.

Target during 2014-2015 Achievement during 2015 -

Type of Industry 2016
No. of Total Employ No. of Total Employm
unit Invest ment unit Invest ent
ment ment
New 2200 875.00 75000 5090 432.07 28225
Small
Industry Existing 1600 240.00 29200 4234 449.79 15240

Total 3800 1115.0 104200 9324 881.86 43465

0
New 6100 14.35 10800 4362 82.41 12230
Cottage
Existing 4600 4.60 3500 2375 45.69 5174
Industry

Total 10700 18.95 14500 6737 128.10 17404

14500 1133.9 118500 16061 1009.9 60869

Total Industries

Source: Bangladesh Bank Website

14
4.6 Loan documents needed for SME financing by banks

Criteria for loan selection are similar among financial institutions, most frequently
requested documents by financial institutions as a part of the loan application include:

 Personal guarantee
 Business plan
 Appraisal of assets to be financed
 Purchase agreementCash flow projection
 Personal financial statement
 Formal application for financing
 Business financial statement
 Tin certificate
 Citizenship certificate

4.7 Commercial Bank

A commercial bank is a financial institution that provides various financial service, such as
accepting deposits and issuing loans. Commercial bank customers can take advantage of a
range of investment products that commercial banks offer like savings accounts and
certificates of deposit.

4.8 List of banks in Bangladesh

State Owned Commercial Banks

1. Agrani Bank Limited
2. Janata Bank Limited
3. Rupali Bank Limited
4. Sonali Bank Limited
5. Bangladesh Development Bank
6. BASIC Bank Limited
7. Bangladesh Krishi Bank
8. Rajshahi Krishi Unnayan Bank

15
Private Commercial Banks
1. AB Bank Limited
2. Bangladesh Commerce Bank Limited
3. Bank Asia Limited
4. BRAC Bank Limited
5. City Bank Limited
6. Dhaka Bank Limited
7. Dutch-Bangla Bank Limited
8. Eastern Bank Limited
9. IFIC Bank Limited
10. Jamuna Bank Limited
11. Meghna Bank Limited
12. Mercantile Bank Limited
13. Midland Bank
14. Modhumoti Bank Limited
15. Mutual Trust Bank Limited
16. National Bank Limited
17. National Credit & Commerce Bank Limited
18. NRB Bank Limited
19. NRB Commercial Bank Limited
20. NRB Global Bank Limited.
21. One Bank Limited
22. Premier Bank Limited
23. Prime Bank Limited
24. Pubali Bank Limited
25. South Bangla Agriculture & Commerce Bank Limited
26. Southeast Bank Limited
27. Standard Bank Limited
28. The Farmers Bank Limited
29. Trust Bank Limited
30. United Commercial Bank Limited
31. Uttara Bank Limited
32. Shimanto Bank Limited

16
Foreign Commercial Banks
1 Bank Al-Falah Limited

2. Citibank N.A

3. Commercial Bank of Ceylon PLC

4. Habib Bank Limited

5. National Bank of Pakistan

6. Standard Chartered Bank

7. State Bank of India

8. Woori Bank

9. HSBC Bank

Islamic Shariah based Commercial Banks

1. Al-Arafah Islami Bank Limited

2. EXIM Bank Limited

3. First Security Islami Bank Limited

4. ICB Islamic Bank Limited

5. Islami Bank Bangladesh Limited

6. Shahjalal Islami Bank Limited

7. Social Islami Bank Limited

8. Union Bank Limited

Source: Financial System" (https://www.bb.org.bd/fnansys/bankfi.php). Central Bank

of Bangladesh. Retrieved.9 August 2016.

17
About the Sample Banks
4.9 Sonali Bank Ltd

Soon after independence of the country Sonali Bank Ltd. emerged as the largest and
leading Nationalized Commercial Bank by proclamation of the Banks' Nationalization
Order1972 (Presidential Order-26) liquidating the then National Bank of Pakistan,
Premier Bank and Bank of Bahawalpur. As a fully state owned institution, the bank
had been discharging its nation-building responsibilities by undertaking government
entrusted different socio-economic schemes as well as money market activities of its
own volition, covering all spheres of the economy. After the emergence of
Bangladesh, the banking system has expanded a lot in the last three decades. Though
many private commercial banks have established, the major portion of Banking,
Business is covered by the four nationalized commercial Banks such as; Sonali,
Janata, Agrani and Rupali Bank Ltd. In the area of Mughal and East India Company
in India, banking got organized. The bank of India Namely the Hindustan Bank was
established in 1948. The State Bank of Pakistan was established after partition of
India into two India and Pakistan. Then on March 26th 1971 Pakistan has partitioned
into two, Pakistan and Bangladesh. In Bangladesh, “Bangladesh Bank” has
established 1971 in the area of Bangladesh. “The Eastern Mercantile Bank” has
established in 1949 as first one. The national Bank of Pakistan, The Bank of
Bahawalpur LTD, The Premier bank LTD. Were jointly declared as Sonali Bank Ltd.
by the presidential order in 1972. Now Sonali Bank Ltd. continues its operations with
1187 branches. Its head office situated at Matijhel, Dhaka. Sonali Bank Ltd. Motihar
Branch, Rajshahi has started its operation since 25th March, 1979. It is situated in
Kazla, Motihar, and Rajshahi. This branch is headed by a senior principal officer and
27 Employees. This is one of the busiest commercial banks in Rajshahi. Sonali Bank
Ltd. Rajshahi Motihar Branch performs all the activities except foreign exchange. Its
office layout, personal skills and counter service are like about all branches of Sonali
Bank Ltd. Ltd. This branch provides credit to Fishes project, poultry firm and live
stock project. It also provides small loans.Sonali Bank Ltd., Motihar Branch is headed
by a senior principal officer, acts as a manger. There are 5 senior officers, 7 officers, 5
Sub accountants, others clerical and non-clerical employees work under branch
manager.

18
4.9.1 SME (Small & Medium Enterprise) Loan provided by Sonali Bank

Sonali Bank Limited emphasizes highest priority on SME financing for eliminating
poverty by increasing SME loan flow at economically underdeveloped area and
peoples. Setting up priority base SME credit Policy for Women and underprivileged
entrepreneurs, Sonali bank working for the improvement of their socio-economic
condition.

Lending Policy:

1) Loan Limit:
BDT 50,000/-(Fifty thousand) to BDT 500,000,00/-(Five crore)

2) Criteria of Borrower:

 Bangladeshi Citizen minimum 18 (eighteen) years old;

 Loan defaulter, Bank-rupt, Mentally wreaked person cannot apply for loan;
 Women Entrepreneurs highly encourage to apply.

3) Nature of Project/Enterprise:

 Proprietorship Enterprise;
 Registered Partnership Enterprise;
 Private Limited Company;
 Joint Venture Company except Public Limited Company.

4) Security:

 The collateral security free loan limit for male entrepreneurs is upto Tk. 5 lac.

 The collateral security free loan limit for women entrepreneurs is upto Tk. 10 lac.

5) Period:

 Project/Term Loan: Maximum 5 years (project period may flexible according to

Project nature)
 Working capital/Trading Loan: 1 year, renewable at the end of period.

6) Repayment procedure:

 Project/Term Loan: monthly/quarterly basis repayable within loan period.

 Working capital/Trading Loan: Daily basis or fully repayment within loan period.

19
4.10 Janata Bank Ltd

Janata Bank Ltd. is a nationalized commercial Bank. It was established under the
Bangladesh Bank nationalization order 1972. Turning created the Bank over the
branches of two abandoned Pakistani Bank. This functioned the East Pakistan with its
head office Dhaka. The Bank started its operation with an initial authorized capital of
TK. 50 millions of paid up capital of TK. 10.5 millions. Authorized capital was raised
to Tk. 30 millions in 1973. Since then the authorized and paid up capital remain
unchanged till December 1983. Letters both were increased from time to time and
their amount stood at TK. 8 billions and TK. 2.594 billion respectively on 31st
December 2000. The reserve funds of the Bank that date were TK. 367 millions. The
management of the Bank is vested in a 7 number board of directors appointed by the
government. The managing director is the chief executive and a deputy-managing
director; six numbers of general managers and other senior executives. The general
managers are in-charge of the Bank branches in six administrative divisions of the
country; namely Dhaka, Chittagong, Rajshahi, Khulna, Sylhet and Barishal. At the
head office the Bank has 27 departments including a training institute. On 30th June
2000, the Bank had a total number of 17138 employees. Up to 31st December 2005the
Bank had 853 domestic and 5 oversees branches (In the Middle East). Among the
domestic branches, 335 were in the urban areas and 518 in the rural areas.

4.10.1 Functions of Janata Bank Ltd

The function of Janata Bank Ltd. may differ from country to country. The prime
functions of Janata Bank Ltd. are as follows:

1. Receiving of money of deposit;

2. Issuing of notes;

3. Lending of money;

4. Transferring money from place to place;

5. Acting as executors and trustees for customers.

6. Furnishing guarantees on behalf of the customers, etc.

20
4.10.2 SME loan of Janata Bank
Janata Bank Limited has been financing Small and Medium Enterprises with a view
to developing a balanced and dynamic industrial sector having a strong base of SMEs
throughout the country. Besides normal financing special tailor-made programs are
undertaken by the Bank. Under this program a credit line has been extended to
MIDAS while another program is under way.

4.10.3 Financing in SME Sector

From the very inception of Industrial credit financing of Janata Bank
(Currently Janata Bank Limited) SME division has sanctioned term loan in small and
medium industries sector in 4535 projects of taka 941.36 crore. Among which taka
548.69 crore has been disbursed against 4310 projects. Outstanding as 31.12.2007 is
taka 446.12 crore and recovery of loan is 70%.

4.11 Jamuna Bank Ltd.

Jamuna Bank Limited (JBL) is a Banking Company registered under the Companies Act,
1994 of Bangladesh with its Head Office currently at Hadi Mansion, 2, Dilkusha C/A, Dhaka-
1000, Bangladesh. The Bank started its operation from 3rd June 2001. The Bank provides all
types of support to trade, commerce, industry and overall business of the country. JBL's
finances are also available for the entrepreneurs to set up promising new ventures and BMRE
of existing industrial units. The bank was established by a group of local entrepreneurs who
are well reputed in the field of trade, commerce, industry and business of the country. The
Bank offers both conventional and Islamic banking through designated branches. The Bank is
being managed and operated by a group of highly educated and professional team with
diversified experience in finance and banking. The Management of the bank constantly
focuses on understanding and anticipating customers' needs. Since the need of customers is
changing day by day with the changes of time, the bank endeavors its best to devise strategies
and introduce new products to cope with the change. Jamuna Bank Ltd. has already achieved
tremendous progress since its beginning. The bank has already built up reputation as one of
quality service providers of the country.

At present the Bank has real-time Online banking branches (of both Urban and Rural
areas) network throughout the country having smart IT-backbone. Besides traditional
delivery points, the bank has ATMs of its own, sharing with other partner banks and
consortium throughout the country.

21
4.11.1 Types of SMEs loan provided by jamuna Bank

A. Jamuna Swabolombi
B. Jamuna Chalantika
C. Jamuna Green

A) Jamuna Swabolombi

As an entrepreneur, definitely you need working capital to run your business

smoothly. To get this working capital generally you need to keep some collateral
security like land as mortgage to the Bank. But you do not have any landed property
or any cash security of your own. So ? Would it be the end of your dream ? Never.
Jamuna Bank will never let you stop because your business is our responsibility.
Jamuna Bank Ltd. has „Jamuna Swabolombi‟ – Collateral free Term Loan in its
basket. Just come with proper documents & get it.

Purpose

 Any justifiable business purpose.

Key Features

 Loan Amount: BDT 5.00 lac to BDT 25.00 lac.

 Tenure: For Trading & Service Industry 30 months. For Manufacturing
industry 36 months.
 Interest Rate: Competitive interest rate.
 Fast and quality service.
 No hidden charge.
 Up to BDT 25.00 lac is collateral Free.

Eligibility

 Having business for at least 2 years in the same line.

 Age Limit: 20 years to 60 years.

Required Documents

 Last twelve months‟ sales statement.

 Last twelve months‟ bank statement.
 Valid Trade License of last two years.
22
  National Voter ID/ Passport of the borrower.
 Photographs of the borrower and the guarantors.
 Utility bills of the concerned business.

B) Jamuna Chalantika
To operate your business with extra ease, term loan is not always the only solution.
Keeping this capital requirement for your business, Jamuna Bank is offering a
package of working capital solution [50% term loan & 50% revolving credit (cash
credit) facility] to run the business smoothly.

Purpose

To meet up working capital requirement of the business.

Key Features

 Loan Amount: BDT 5.00 lac to BDT 50.00 lac.

 Tenure: For revolving loan- Maximum 01 year (Renewable).
 For Term Loan- Maximum 36 months. Interest Rate: Competitive interest rate.
Fast and quality service.
 No hidden charge.
 Registered Mortgage of Property is required.

Eligibility

 Having business at least 2 years in the same line.

 Age Limit of the Borrower : 20 years to 60 years.

Required Documents

 Last twelve months‟ sales statement.

 Last twelve months‟ bank statement.
 Valid Trade License of last two years.
 National Voter ID/ Passport of the borrower.
 Photographs of the borrower and the guarantors.
 Utility bills of business.

23
C) Jamuna Green

To save our beloved earth from the disaster of Green House Effect, Jamuna Bank is
offering ECO friendly product „Jamuna Green‟. Under this product, you can get
finance for ETP plants in different sectors, Eco friendly vehicles, Eco friendly fields
(reduce CO2 emission), Bio Fertilizer, Bio gas plants, Solar plants and Eco friendly
any other business. Mode of finance shall be Term Loan mainly.

Purpose

 To facilitate establishment of eco friendly projects.

Key Features

 Loan Amount: Max. 300 lac.

 Tenure: Max. 60 months.
 Interest Rate: Competitive interest rate.
 Fast and quality service.
 No hidden charge.

Eligibility

 Having business for at least 2 years in the same line.

 Age Limit: 20 years to 60 years.

Required Documents

 Last twelve months‟ sales statement.

 Last twelve months‟ bank statement.
 Valid Trade License of last two years.
 National Voter ID/ Passport of the borrower.
 Photographs of the borrower and the guarantors.
 Utility bills of the concerned business.

24
4.12 Pubali Bank Limited
The Bank was initially emerged in the Banking scenario of the then East Pakistan as
Eastern Mercantile Bank Limited at the initiative of some Bangalee entrepreneurs in
the year 1959 under Bank Companies Act 1913 for providing credit to the Bangalee
entrepreneurs who had limited access to the credit in those days from other financial
institutions. After independence of Bangladesh in 1972 this Bank was nationalized as
per policy of the Government and renamed as Pubali Bank. Subsequently due to
changed circumstances this Bank was denationalized in the year 1983 as a private
bank and renamed as Pubali Bank Limited. Since inception this Bank has been
playing a vital role in socio-economic, industrial and agricultural development as well
as in the overall economic development of the country through savings mobilization
and investment of funds.
At Present, Pubali Bank is the largest private commercial bank having 455 branches
and it has the largest real time centralized online banking network
4.13 Types of SMEs loan provided by the Pubali Bank Limited
A. Pubali Prochesta.
B. Pubali Sujan.
C. Pubali Subarna.
D. Pubali Karma Uddog.

A).Pubali Prochesta:
The SMEs worldwide are recognized as engines of economic growth. The important
role of SMEs in the national economy of Bangladesh for creating over 90 per cent of
industrial enterprises, generating employment to 4 out of 5 industrial workers and
contributing to over one-third of industrial value-added to gross domestic product
(GDP) emphasizes its promotion by providing access to finance. The relative SMEs
share in manufacturing value-added is much higher and estimated to vary between 45
to 50 per cent of totaling value-added generated by the manufacturing industries
sector. With these perceived merits of SMEs, Bangladesh Bank has emphasized for
their promotion especially in the area of access to finance and has given several
directions to the scheduled Banks. For compliance to central bank‟s instructions and
prospects of SMEs in Bangladesh economy, Pubali Bank Limited introduced three
products namely Pubali Subarna, Pubali Karmo Uddyog and Pubali Sujan. All these

25
products are demand loan by nature. But we do not have any product for SMEs to
ensure continuous finance for fulfilling the needs of working capital. Research and
Development Division in consultation with the Creadit Division has designed a
product named “Pubali Prochesta” to augment working capital base in SMEs for
uninterrupted day to day operations. The features of the products are given below

Product Object:
Small and medium enterprise ('SME”) borrowers may need to ensure source of continuous
finance for uninterrupted operation. Pubali Prochesta will help SMEs to augment working
capital base to meet the day to day financial needs.
Loan size: Tk. 2 lac to Tk 10 lac for SE customers. Tk 5 lac to 10 lac for ME customers.
Customer segment: Any SME entrepreneur
B). Pubali Sujon:
Product Objective/Purpose: To purchase capital Machinery, Office equipment,
Covered Van, Pick up Van etc
Loan Ceiling: Tk. 2.00-lac to Tk. 10.00-lac
Rate of Interest: @15.00% P.A. subject to change at Bank's discretion

C). Pubali Subarna:

Product Objective/Purpose: To meet up working capital requirement.
Loan Ceiling: Tk. 2.00-lac to Tk. 10.00-lac.
Rate of Interest: @15.00% P.A. subject to change at Bank's discretion.

D). Pubali Karma Uddog:

Product Objective/Purpose: To meet up short term fund requirement of SME's and
SME's run by women entrepreneurs
Loan Ceiling: Tk. 2.00-lac to Tk. 10.00-lac
Rate of Interest: @15.00% P.A. and 10.00% P.A. for woman entrepreneurs subject
to change at Bank's discretion.

26
 5.1 Contribution of Commercial Banks by Providing SMEs loan

In Bangladesh several banks are financing in the SME sector but as mentioned earlier,
many of them do not have good experience regarding the loan servicing in this sector.
Many banks are facing problem to recover the loan amount provided in SME sector.
For this reason still many banks are not willing to invest in this sector. However,
Bangladesh Bank gives the target to both the government bank and private
commercial bank to provide the SMEs loan in easy way with a little interest rate by
which the SMEs entrepreneur can get their required money to operate the SMEs
enterprise and they can play a vital role in the economic development of the country.

5.2: Contribution of two Government Banks towards SMEs Sector

Bangladesh Bank gives target to take part in contribution in SMEs sector by providing
loan. The Scenery of providing SME loan by Sonali and Janata Bank limited in 2014,
2015, and 2016 are following.

Table 5.1 Contribution of two Government Banks towards SME Financing in

Year (2014, 2015, 2016)
(Taka in crore)
Sonali Bank Limited Janata Bnak Limited

Loan Total Loan Achievement Loan Total Loan Achievement

Year Disbursement Disbursement Rate Disbursement Disbursement Rate
Target (%) Target (%)

2014 3850 1459 37.89 3500 1293 36.95

2015 4250 1487 34.99 3860 1500 38.86
2016 4540 1351 29.76 4450 1750 39.32

Sources: Financial statement of Bangladesh Bank (2014, 2015, 2016)

27
 Yearly Achievement of Target Given by Bangladeh Bank
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
2014 2015 2016
Loan Disbursement Target of SBL Total Loan Disbursement of SBL
Loan Disbursement Target of JBL Total Loan Disbursement of JBL

Figure: 5.1 Achievement of Target Given by Bangladesh Bank in (2014, 2015, 2016)

Comment
Sonali Bank Limited and Janata Bank Limited provides major portion of loans in the
SMEs sector for the economic development of the country. Bangladesh Bank has
fixed up a target to Sonali Bank Limited to disburse SMEs loan 3850, 4250, 4540 (tk
in crore) in the year of 2014, 2015, 2016 respectively. Bangladesh Bank has also
fixed up a target to Janata Bank Limited to disburse SMEs loan 3500, 3860, 4450
( tk in crore) in the year of 2014, 2015, 2016 respectively. Sonali Bank Limited has
achieved to disburse SMEs loan 1459, 1487, 1351 (tk in crore) in the year of 2014,
2015, 2016 respectively. Janata Bank Limited has achieved to disburse SMEs loan
1293, 1500,1750 (tk in crore) in the year of 2014, 2015, 2016 respectively. The
achievement rate of Sonali Bank Limited is 37.89%, 34.99%, 29.76% in year of 2014,
2015, 2016 respectively. The achievement rate of Janata Bank Limited is 36.95%,
38.86%, 39.32% in year of 2014, 2015, 2016 respectively.

From the above table, it is cleared that achievement rate of Janata Bank Limited is
comparatively higher than the Sonali Bank Limited.

28
 5.3: Contribution of two Private Banks towards SMEs Sector
Bangladesh Bank gives the target of providing loan in SMEs sector like the
government bank. The Scenery of providing in SME loan by Jamuna and Pubali Bank
limited in 2014, 2015, 2016 are as following.

Table 5.2 Contribution of two Private Banks towards SME Financing in

Year (2014, 2015, 2016) (Taka in crore)
Jamuna Bank Limited Pubali Bnak Limited

Loan Total Loan Achievement Loan Total Loan Achievement

Year Disbursement Disbursement Rate Disbursement Disbursement Rate
Target (%) Target (%)

2014 700 424 60.57 840 671 79.89

2015 850 538 63.29 1150 887 77.13
2016 1020 803 78.73 1360 1031 75.81

Sources: Financial statement of Bangladesh Bank (2014, 2015, 2016)

Yearly Achievement of Target Given by Bangladeh Bank

1600
1400
1200
1000
800
600
400
200
0
2014 2015 2016
Loan Disbursement Target of Jamuna Bank Limited
Total Loan Disbursement of Jamuna Bank Limited
Loan Disbursement Target of Pubali Bank Limited

Figure: 5.2 Yearly Achievement of Target Given by Bangladesh in Year (2014, 2015, 2016)

29
Comment:
Like other Commercial Banks Jamuna Bank Limited and Pubali Bank Limited
provides major portion of loans in the SMEs sector for the economic development of
the country. Bangladesh Bank has fixed up a target to Jamuna Bank Limited to
disburse SMEs loan 700, 850, 1020 (tk in crore) in the year of 2014, 2015, 2016
respectively. Bangladesh Bank has also fixed up a target to Pubali Bank Limited to
disburse SMEs loan 840, 1150, 1360 ( tk in crore) in the year of 2014, 2015, 2016
respectively. Jamuna Bank Limited has achieved to disburse SMEs loan 424, 538,
803 (tk in crore) in the year of 2014, 2015, 2016 respectively. Pubali Bank Limited
has achieved to disburse SMEs loan 671, 887, 1031 (tk in crore) in the year of 2014,
2015, 2016 respectively. The achievement rate of Jamuna Bank Limited is 60.57%,
63.29%, 78.73% in year of 2014, 2015, 2016 respectively. The achievement rate of
Pubali Bank Limited is 79.89%, 77.13%, 75.81% in year of 2014, 2015, 2016
respectively.

From the above table, it is clearly observed that the achievement rate of Jamuna Bank
Limited is comparatively higher than the Pubali Bank Limited.

30
 5.4 Comparison Between two government banks and two private
banks
Both the Government banks and private banks contribute in SMEs sector by providing
the required finance by loan with a low interest rate. SME sector is becoming the
lucrative target point by both of the government and private bank. There exist some
differences between the government and private bank in scale of providing loan or
financial assistance. These differences are following.

Table 5.3 Comparison between Two Government and Two Private Banks

Government Banks Private Banks

(Sonali and Janata Bank Limited) (Jamuna and Pubali Bank Limitd)

Loan Total Loan Achievement Loan Total Loan Achievement

Year Disbursement Disbursement Rate Disbursement Disbursement Rate
Target (%) Target (%)

2014 7350 2793 38 1540 1095 71.10

2015 8110 2987 36.84 2000 1425 71.25
2016 8990 3101 34.49 2380 1834 77.05

Sources: Financial statement of Bangladesh Bank in Year (2014, 2015, 2016)

Comparison Between Two Government Banks and Two Private Banks

10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
2014 2015 2016
Loan disbursement target of Two Govt. Bank
Total Loan Disbursement of Two Govt. Bank
Loan disbursement target of Two Private Bank2
Total Loan Disbursement of Two Private Bank2

Figure: 5.3 Comparison between Two Government Banks and Two Private Banks of
distributing SME loan in Year (2014, 2015, 2016)

31
Comment
Total loan disbursement target of two government banks, Sonali and Janata Bank
Limited is 7350, 8110, 8990 (tk in crore) in the year of 2014, 2015, 2016 respectively.
Besides, the total loan disbursement target of two private banks, Jamuna and Pubali
Bank Limited is 1540, 2000, 2380 (tk in crore) in the year of 2014, 2015, 2016
respectively. Two government banks, Sonali and Janata Bank Limited have achieved
to disburse SMEs loan 2793, 2987, 3101 (tk in crore) in the year of 2014, 2015, 2016
respectively. Besides, Two private banks, Jamuna and Pubali Bank Limited have
achieved 1095, 1425, 1834 (tk in crore) in the year of 2014, 2015, 2016 respectively.
The achievement rate of two government banks, Sonali and Janata Bank Limited is
38%, 36.84%, and 34.49% in the year of 2014, 2015, 2016 respectively. The
achievement rate of two Private banks, Jamuna and Pubali Bank Limited is 71.10%,
71.25%, and 77.05% in the year of 2014, 2015, 2016 respectively.

From the above table it is clearly observed that the achievement rate of two private
banks is comparatively higher than the government bank.

32
5.5 Different Categories of Business
In the survey, it is found that trading concern is the major portion of the interviewed
SME proprietors. 80% of the proprietors run the trading business while manufacturing
percentage is 16% and service only 4%. In terms of the business sectors, textile &
fabrics is the leading business type (38%). The others plastic and retail products(
18%), paper and book (4%), engineering works (4%), furniture and wood products
(8%), agro business (14%), iron and steel (8%) and electronics (6%)

Business Type
Manufacturing Trading Service

16% 4%

80%

Figure: 5.4 Business Type & Business Sector

Fabrics
6% Business Sector Plastic &Retail
Products
28%

Textile
60%
Paper & Book
6%

Figure: 5.5 Business Type & Business Sector

33
5.6 SME Proprietors Perception on the Drawbacks of Banks SME

Respondents were asked which problems they think is most frequent for SME service.
40% of respondents pointed out that lengthy procedure is a problem for Jamuna Bank
Ltd SME division. 30% of respondents pointed out that inexperienced marketing force
is a problem. Other two problems of Jamuna Bank Ltd SME are High Interest Rate
(14%) and Client service (16%).

Problem of Banks SME

Inexperienced High Interest Rate
Marketing 14%
30% Client Service
16%

Lengthy Procedure
40%

Figure: 5.6 Drawbacks of Banks SME

5.7 SME entrepreneur who take or not take SME loan

Among Respondents 66.67% that means a large number of SME entrepreneurs take
bank loan to operate their SME business which is very remarkable. However about 3
out of 10 do not take bank loan to run their business.

Table- 5.4: Distribution of entrepreneurs whether or not they take Bank loan to
operate their SME

Loan taken by entrepreneur from Number Percentage

banks (%)

Yes 16 66.67
No 8 33.33
Total 24 100
Source: Survey of SME entrepreneurs

34
 Whether or not they take Bank loan to operate their
SME

No
33%

Yes
67%

Figure: 5.7 whether or not they take Bank loan to operate their SME

5.8 Types of opinion of getting loan by entrepreneurs from the bank.

There is a satisfaction numbers of entrepreneur‟s responses is satisfied and a large

number of entrepreneur‟s response is neither satisfied nor dissatisfied. However there
are one out of 3 are satisfied and negligible number is dissatisfied.
Table- 5.5: The degree of satisfaction/dissatisfaction with the way of getting loan
by entrepreneurs from the bank.

Types of opinion
Number Percentage
(%)

Highly satisfied 0 0

Satisfied 8 33.33
Neutral
13 54.16

Dissatisfied 3 12.5

Highly dissatisfied 0 0

Total 24 100
Source: Survey of SME entrepreneurs

35
 Types of opinion
14
12
10
8
6
4
2
0
Highly satisfied Satisfied Neutral Dissatisfied Highly dissatisfied

Figure: 5.8 The degree of satisfaction/dissatisfaction with the way of getting loan by
entrepreneurs from the bank.

5.9 Easy or tough to get SME loan from bank

A large number of entrepreneur‟s responses neither easy nor tough to get SME loan
from bank. However 16.67% people said that it is easy to get SME loan from bank. A
negligible number of respondent said it is tough to get loan from bank.

Table 5.6: Entrepreneurs responses to what extent it is easy or tough to get SME
loan from bank
Types Number Percentage
(%)

Very easy 0 0

Easy 4 16.67

Neutral 18 75

Tough 2 8.33

Very Tough 0 0

Total 24 100
Source: Survey of SME entrepreneurs

36
 Easy or tough to get SME loan from bank
20
18
16
14
12
10
8
6
4
2
0
Very easy Easy Neutral Tough Very Tough

Figure: 5.9 Easy or tough to get SME loan from bank

5.10 Bank’s contribution on financial and nonfinancial activities

Many banks near about three out of ten banks provide nonfinancial facilities like SME
training, awareness program etc .and those are basically private bank. On the other
banks about seven out of ten mainly public banks don‟t provide any nonfinancial
activities.

Table-5.7: Bank’s contribution on financial and nonfinancial activities

Contribution on financial and nonfinancial Number Percentage

activities (%)

Financial activities only 13 72.22

Both financial and nonfinancial activities 5 27.78

Total 18 100
Sources: Survey on government and private banks

37
 Financial and Nonfinancial activities
Financial activities only Both financial and nonfinancial activities

28%

72%

Figure: 5.10 Financial and Nonfinancial Activities

5.11 Measurement of how much important of Bank’s contribution in

SME sector
Among the respondents five out ten bankers agree that banks play a vital role in the
development of SME sector in our country. One out of six said banks are very
important in the development of SME sector and one out of six argues that banks have
important contribution in SME sector.

Table -5.8: Bank’s contribution in SME sector

Types Number Percentage
(%)
Very much important 10 55.55
Very important 3 16.67

Important 3 16.67
Less important 2 11.11
Not important 0
Total 18 100
Sources: Survey on government and private banks

38
 Bank’s contribution in SME sector
Very much important Very important Important Less important Not important

0%

11%

17%

55%

17%

Figure: 5.11 Bank‟s contribution in SME sector

39
6.1 Findings

 In year 2014 2015, 2016, we have found that the achievement rate of
providing SME loan of Sonali Bank Ltd. and Janata Bank Ltd is 37.89%,
34.99%, 29.76% and 36.95%, 38.86%, 39.32% respectively. So we can say
that the achievement rate of Janata Bank Limited is comparatively higher
than the Sonali Bank Limited. (Table 5.1)

 In year 2014 2015, 2016, we have found that the achievement rate of
providing SME loan of, Jamuna Bank Ltd. and Pubali Bank Ltd is 60.57%,
60.57%, 78.73% and 79.89%, 77.13%, 75.81% respectively. So we can say that
the achievement rate of Pubali Bank Limited is comparatively higher than
the Jamuna Bank Limited. (Table 5.2)

 In year 2014 2015, 2016, we have found that the achievement rate of
providing SME loan of two government banks, Sonali Bank Ltd. and Janata
Bank Ltd is 38%, 36.84%, 34.49% respectively. Besides the achievement rate
of providing SME loan of two private banks, Jamuna Bank Ltd. and Pubali
Bank Ltd is 71%, 71.25%, 77.05% in year 2014, 2015, and 2016 respectively.
So we can say that the achievement rate of private commercial banks is
comparatively higher than the government Banks. (Table 5.3)

 In Table- 5.4, It has found that 66.67% that means a large number of SME
entrepreneurs take bank loan to operate their SME business which is very
remarkable. However about 3 out of 10 do not take bank loan to run their
business. A large number of entrepreneur‟s responses nighters satisfied not
dissatisfied. However there are one out of 3 are satisfied. A sizable number of
respondent are dissatisfied.

 In Table 5.5, A large number of entrepreneur‟s responses are neutral that

means neither satisfaction nor dissatisfaction to get SME loan from bank.
However 54.16% people are neutral, 33.33% are satisfy and 12.5% are
dissatisfied.

40
  In Table 5.6, 16.67% people have said that it is easy to get loan, 8.33%
peole have said that it is tough to get loan and 75% people are neutral they
have said nor easy nor tough.

 In Table 5.7, 72.22% banks provide nonfinancial facilities like SME

training, awareness program etc .and those are basically private bank. On
the other hands, 27.78 % mainly public banks don‟t provide any
nonfinancial activities.

 Table 5.8, 55.55% banks agree that banks play a vital role in the
development of SME sector in our country. 16.67% banks are very
important and important in the development of SME sector and 11.11%
argues that banks have less important contribution in SME sector.

Others Findings

 Bangladesh Bank and SME foundation claim that no collateral securities are
needed for getting SME loan. But without collateral securities very few banks
sanction SME loan to entrepreneurs.
 SME foundation claims that they disburse SME loan on single digit
.Bangladesh Bank gives target to commercial bank to disburse loan on 10
Percent interest rates. But in reality Public banks give loan on about 14 to15
percent and private banks give loan on about 18 to 19 percent.
 Bankers are not much interested on providing SME loan. As it requires
continuous monitoring, much attention and more investment on less return
than industrial loan. There is greater chance of SME loan to become bad loan
than others.
 Many banks are facing problem to recover the loan amount provided in this
SME sector.
 Bangladesh Bank gives target to government banks and private banks to
disburse loan in SME sector. Since then it has got momentum .So Bangladesh
Bank is playing a key role on SME loan disbursement.
 The target of government banks given by the Bangladesh Bank to provide
loans in SME sector is normally more than the private sector.

41
6.2 Recommendations

Bindings should be given by Bangladesh Bank to other commercial banks about loan
disbursement on 10 percent or single digit interest rate. Otherwise, they have to face
lawful action.

 Banks can be inspired by giving award at the national level by the government
as they provide more loans on SME sector.
 More non-financial facilities on SMEs sector can make the entrepreneurs
greatly benefitted.
 Small & Medium Enterprise (SME) plays a pivotal role in the economic
growth and development of a country. Actually, SME works as the platform
for job creation, income generation, and development of forward and
backward industrial linkages and fulfillment of local social needs. So SME
loan disbursement should be given more emphasis at the context of
Bangladesh.
 SME foundation can play more vital and proactive role by disbursing their
loan through certain bank which will conform to their provision of single loan
disbursement.
 More rural people should be brought under SME loan facility coverage though
it has the risk.
 Awards should be given at the individual level that that will have contribution
on SME loan and disbursement and other activities of SME.AS we can get a
man like Nobel Laureate Dr. Muhammad Younus of Grameen bank.

42
6.3 Conclusion:

SMEs are considered to be the seedbed for the development of entrepreneurial skills
and innovation. Small capital requirement makes easy entry and exit possible and
private sector entrepreneurial activities have many important spill over and positive
externality effects. However, liberalization of the economy along with rapid
globalization has posed several challenges to SMEs not only international market but
also in the domestic economy. Since SMEs are based on relatively small investment,
their survival depends on readily available markets with easy access. In today‟s world,
market development is a much more challenging task, which requires coordinated
efforts by individual business enterprises and the Government. Bangladesh as failed to
maximize the benefits derived from the SME sector which promises and needs to play
a pivotal role in promoting and sustaining the industrial as wells overall economic
growth. Banks are the major source of financing for SME sector. Many of the banks
are not interstate to provide more loans in SMEs sector. SMEs are the growth sector
in Bangladesh and here is a great possibility to develop the sector in Bangladesh of
social economic condition through development of SME.

43