If there is not any ill intention, everybody with able body and mind has the

right to get financed, though, there might be competition due to resource

constraint and priority setting problems. This paper advocates for this right
and discusses one plausible escape from the limitation of the conventional
financing procedure especially for poor and would be SMEs by turning it
more humanitarian and tuned to the countrys economic phase of transition
and SDGs; i.e.; income redistribution supporting and inclusive. However,
focus has been restrained here only to the biggest and most important but
least progressed sector of finance provider, the banks.

Shortcomings of Conventional System: As a pioneering ground of Microcredit,

it is a matter of regret that banking channel, the principal channel of
financing, has not evolved much. Moreover, it was expected that huge pool of
microcredit beneficiary would be graduated to banking channel after
improving their financial acceptability. Unfortunately, in spite of high cost and
too frequent installment to gain actual financial benefit, those people always
ran into Microfinance providers not only for hassle free disbursement but also
unwelcoming attitude of the banks. From 2006, after establishment of SME
foundation some deliberate steps has been made taken for the established
SMEs but the problem root is yet to be addressed and hence those who were
underfinanced remained underfinanced. Century old tradition of banking
made our mindset so conservative that our banks narrowed down their
outlook only to those who are already well off. Among many we consider
below 3 challenges are major risks faced by banks which are well known and
apparent:
1. Borrower Selection
2. Fund Diversion
3. Recovery Risk
In our opinion, there are 3 other less apparent shortcomings of conventional
financing procedure of banks that demand attention.
1. Personal Liability of bank Manager
2. Unwilling to take the branch at stake
3. Monitoring hazards
Below are the points of our proposed procedure of financing to the poor. It is
presented under different points but all of them together make the whole
picture. In this model we have tried to fix the shortcomings stated above.

1. Balanced allocation of fund: To make the development sustainable

there has to be perfect allocation of fund across various section of
economy. Besides infrastructure building and industrialization proper
attention should be paid to underserved class of society. Adequate low
cost fund should be channeled to this section every year.
2. Call for loan applications on seasonal basis instead of round the year:
We think, it would be convenient if banks process loan application for
once (or more than once) in a year. They would accept loan application
just for a limited period and reply all the applicants at the same time.
When contrast is made among applications keeping a limited fund in
hand, hardest part of the task of borrower selection becomes easier.
Period of application calling would be set by different banks as they like
and it might vary different regions of country even for the same bank.
Well circulation in details should be ensured.
3. Required papers for the Loan applicant: As we believe that getting loan
should be considered as a right, and poor people would not ask for
huge amount of loan, say for, not more than one lac, required
documents should be as minimal as just proof of identity. Our proposal
here is an identical questionnaire set by experts should be filled up
where applicants integrity and utilization description of the prayed
fund would be presented to the bank for judgment. We also
recommend that Witness will be taken instead of Guarantor. In case of
applicant living in a place other than his/her permanent address one
witness could be taken from his/her permanent address.
4. Loan approving body: Conventional authorization of branch manager
for small amount of loan sanctioning would be replaced by a body
comprising of zonal head (or zonal office representative), disbursing
branch manager along with other two or three branch manager and, if
possible, a psychologist. After primarily screening out the applications
rest of the applicants will be interviewed by this body and would
attempt to verify the information provided in the application. Our
recommendation here is that, existing customer of any microcredit
organization with good transaction record should get extra points in
the selection process. At the end of selection process result would be
published in daily newspapers with photo.

(Those banks who prefer the relationship based banking may

communicate the applicant during the application screening period)
5. Recovery: It is well known that most important point of microfinance is
regular monitoring. Banks are lagging behind in this task because of
their high cost employee. Here our recommendation is to increase the
use of Call Center which is already being used. Loanee could be
employed for a certain area for helping collection of others and get a
rebate. Besides, commitment for repayment arrangement i.e.; weekly,
fortnightly, monthly should be taken and feasibility should be checked
by the approving body based on applicants income profile. Alternative
of door to door service should be introduced by banks like mobile
banking.
6. Managing Non Performing Loans: Acumen in borrower selection could
reduce NPL percentage, though it might not be avoided completely.
Instead of law suit we recommend of traditional system of court
Shalish by the local honorable personalities including Union
Chairman/Ward Commissioner in case of non-performing loans. If still
there is defaulted loans banks can follow their regular procedure like
Cheque Fraud case or Ortho Rin Adalot, however, law should be
modified accordingly. In fact, serious attention should be put regarding
alternative lawsuit procedure as current one is overburdened and in
some cases outdated.
(Not to mention, a tiny scam of industrial or big project loan is
prospective to change of fate of hundreds of potential poor people.
However, great ideas like Credit Guarantee Fund are there for extra
safety.)

So far, our banking sector has been very conservative yet prudent. Research
based literatures on our financial system are rich as well as there are a lot of
Poor friendly practices in the banks, although, there is lack of effectiveness.
However, it is the high time bank should change its outlook and take the lead
in taking off of the economy. We hope that conventional wisdom can bring
good result by following this model.

Amitav Barua

MSS (Economics), CU

Officer, Rupali Bank

Ltd.
Amitav16@gmail.co
m

S M Moslam Uddin

Sharmin Akter

MSS (Economics), CU
Officer,
NRB Commercial
Bank Ltd.
Mosu86@gmail.com

MSS (Economics), CU
26sharminzul@gamil.
com