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CMSME in Bangladesh-

Legal Framework, Financing and


Reporting

SME & Special Programmes Department


Bangladesh Bank, Bangladesh
Outline

Background
Legal Framework
Financing
Reporting
Background
Bangabandhu: The Man Behind the Nation

A Poet of Politics
- Newsweek Magazine, April 1971

In a sense, Sheikh Mujib is


a greater leader than
George Washington,
Mahatma Gandhi and De
Valera
- Lord Fenner
Brockway
Sheikh Mujibur
Rahman

Bangabandhu wanted maximum utilization of the


available natural and human resources and massive
industrialization towards the directions and thus
making independence meaningful for all citizens.
Prime Minister of the Government of
the Peoples Republic of Bangladesh

H.E Honorable Prime Minister Sheikh Hasina.

Bangladesh became a role model for the globe due


to successful implementation Of CMSME through
Bangladesh Bank.
CMSMEs in Bangladesh
CMSME covers wide spectrum of
activities..
Manufacturin Service Trading
g

CMSME involves different types of


organizations like-
proprietary concerns,
partnership firms,
private limited companies.
Defining SME/CSI

The Ministry of Industries (MOI) defines the


Cottage, Micro, Small and Medium Industries
through Industrial Policy.

The basis of Bangladeshi definition is the


value of fixed assets[excluding land & building]
and number of employees employed.
CMSMEs Definition in Bangladesh-IP 2016

Value of fixed asset excluding land and # of manpower


Criteria
Building employed

Size Mfg. Service Mfg. Service

Max 15
Cottage Less than Tk.10 Lakhs [including family
members]

Less than Tk.10


Micro Tk. 10-75 Lakhs 16-30 Max 15
Lakhs

Tk. 75 Lakhs Tk. Tk. 10 Lakhs- Tk. 2


Small 31- 120 16-50
15 crore crore.
More than Tk. 15
121-300
Medium crore and Max of Tk. 2 crore- 30 crore 51-120
RMG-1000
Tk. 50 Crore

BB also defines the size of Trading Concerns as per the


criteria set for Service sectors.
Defining SME/CSI

Internationally the definition of SME varies


from country to country.

IFC/WB has defined SMEs on the following


Criteria-
Size/Criteri No. of
a Employees
Small 5-9
Medium 10-99
Defining SME/CSI-Limits

The Industrial Policy-2010 & 2016 have scope


to define CMSMEs under Manufacturing and
Service Sector.

However, only 38% of all business units are


under manufacturing and service sector.

Almost 65% of total CMSME credit goes to


enterprises under Trading sector.

Therefore, Defining MSMEs under Trading


sector is crucial issue.

Using Turnover (along with Manpower) to


define MSMEs under Trading sector.
Legal Framework
Legal Framework

Constitution of the Peoples


Republic of Bangladesh (enacted
in November 1972)
The Article 16 of the
constitution emphasizes the
development of cottage and
other industries and agricultural
revolution as the means of
removing the disparity in the
standards of living in rural and
urban areas.
Legal Framework

Therefore, the development of CMSMEs has


been emphasized in the following planning
documents-
The Outline Perspective Plan [OPP]-Vision 2021

The Sixth Five Year Plan (2011-15); &


the Seventh Five year Plan (2016-20)

The Industrial Policy 2010 & 2016

BB also Bangladesh Bank Strategic plan


prioritize the 2015-19

development of BBs SME Credit Policy and


CMSMEs Programs, 2010 and Circulars
National Policies and Strategies

BBs Strategic Plan 2015-19


Strategic
Action Plans
Objectives
Facilitate the initiatives Identify the Demand and Supply gap in the
to provide medium to medium to long term SME financing.
long terms finance for Implement domestic and donor funded
SMEs and projects.
manufacturing Exploring feasibility of developing Credit
industries Guarantee Scheme for CMSMEs.
Provide prudential
policy support for
Promote new entrepreneurs.
creating new
Create and implement a financing program
entrepreneurs in SME
for start-up business through policy and
sector with special
funding support.
emphasis to women
Extend support towards
entrepreneurship.
achieving national goal
of reducing Identify suitable development partners to
unemployment through prepare action plan for achieving training
skill development for objectives.
self employment and Arrange training for job seekers.
jobs for the unemployed
Policy Interventions for CMSME Financing
& Development- BBs Initiative.
BBs SME Credit Policies & Programmes 2010 and
Circulars

For streamlining SME financing and activities of


Banks and NBFIs in a very systematic manner BB
has made a comprehensive SME Credit Policies &
Programmes in 2010. Special features include-

Enhancing access to Finance for the CMSMEs.


Indicative target for CMSME loan
disbursement.
Cluster/ Area Approach based financing.
Priority to Women Entrepreneurs.
Priority to Small Entrepreneurs.
Emphasizing Manufacturing and Service Sector.
Finance to SME/CSI
Policy Interventions for CMSME Financing &
Development- BBs Initiative.

Institutional Building
MSMEs were the missing middle.
They were not served by MFIs
MSMEs were also perceived as riskier for finance by
Banks and FIs.

A milestone decision was taken in


December,2009
A new department named SME & Special
Programs Department (SMESPD) was created in
BB to regulate and supervise SME financing
activities of the whole country.
Innovative Initiatives for CMSMEs
Financing

Target Based Lending activities (2010)

Initiatives for women


entrepreneurship development
Women Entrepreneurs Development
Unit:

Implementing Different Refinance/Pre-


finance Schemes

Monitoring of CMSME lending


Innovative Initiatives for CMSMEs
Financing

Credit Guarantee Scheme

Training programs- SEIP

Performing promotional activities:


SME Fair, Bankers-Entrepreneurs
Gathering.
Incentives:
Weightage on CAMELS Rating, favorable
provision requirements for CMSME
financing etc.
Women Entrepreneurs Development
Initiatives

15% of all refinance window to be specified for WE

10% target for WE lending of total SME


Interest rate cap for WE loan under BB refinance Window (bank rate +
5%)
WE loan application to be given priority

WE facilities provided by banks to be broadcasted in mass media

Group based lending allowed to WE

Up to Tk. 2.5 million clean exposure limit for WE [without any collateral]

WE dedicated help desk to be opened by the banks & FIs

Priority in processing credit application for women MSMEs

Engaging women business associations in sourcing women clients

Capacity building initiatives for women entrepreneurs

Promotion of women entrepreneurship


Refinance Facilities-Liquidity Support

BB has been providing refinance facilities to Banks and


NBFIs against their disbursed CMSME credit
At present, refinance is being provided from five funds
Name of the Fund Size of the Fund

Fund Provided by BB from its Own Source


Bangladesh Bank (BB) Fund Tk. 850 Crore
Fund for Agro-based Industrial Establishment Tk. 450 Crore
in Urban Areas (Agro Fund)
Refinance Scheme for New Entrepreneurs Tk. 50 Crore
under Cottage, Micro and Small Sector
Donor Supported Fund
Financial Sector Project for the Development Tk. 377 Crore
of Small and Medium Sized Enterprises
(FSPDSME)
Fund Created by Islamic Banks
Islamic Shariah Based Refinance Fund Tk. 475 Crore
Refinance Facilities-Liquidity Support

BB also successfully implemented three other


projects funded by WB and ADB.

Until November 2016, Tk. 5902 crore


has been refinanced against 52,454
enterprises.
Success: Target
Achievement
Target based CMSME Financing (Tk. in Crore)
115870
120000
104586
100910
100000 89031
85323

74187
80000 69753.42

56940.12 59012.78
60000 53543.93 53719.44

38858.12
40000

20000

0
2010 2011 2012 2013 2014 2015

Target Achievement

The disbursement target for 2016 is Tk. 113,503 crore. As of Sept.


2016, the disbursement was Tk. 101,192 crore (89% of the target).

AFI has recognized this target based lending as Best Practice in


SME financing.
Success: SME Credit by Sectors

Chart -Disbursement of SME Credit by Sectors (Tk. in Crore)

2015

2014

2013

2012

2011

2010

0 20000 40000 60000 80000 100000 120000


Success: Credit Disbursement to Women
Led MSMEs

Credit Disbursement to Women Led SMEs


140,000 4.50%
120,000 4.00%
3.50%
100,000
3.00%
80,000 2.50%
BDT in Crore 2.00%
60,000
1.50%
40,000
1.00%
20,000 0.50%
- 0.00%
2010 2011 2012 2013 2014 2015

Year No. of Women Amount


During January- Entrepreneurs Disbursed
September 2016, (Tk. In Crores)
2010 13,831 1,805
Tk. 4157 crore has 2011 16,696 2,048
already been 2012 17,362 2,244
financed to 32,842 2013 41,695 3,347
2014 42,730 3,939
women led 2015 179,017 4,227
CMSMEs
Success: Priority to Small
Enterprises

Chart: Ratio of Small Enterprises to Total Enterprises financed


800000 100%

91% 90%
700000
83%
81% 80%
600000 76%
71% 70%
65%
500000
60%

400000 50%

40%
300000
30%
200000
20%
100000
10%

0 0%
2010 2011 2012 2013 2014 2015
Total Small % of Small Firmsto Total
Success: Breakdown of Financing to Small
and Medium Enterprises

100%

90%

80% 31925 41011 48326 55846


27863
30513
70%

60%

50%

40%

30% 37829 44312 52585 60025


25856
23035
20%

10%

0%
2010 2011 2012 2013 2014 2015
Small (BDT in Crore) Medium (BDT in Crore)

The Share of Small Enterprises Financing is Increasing gradually


Reporting Formats for Banks and
FIs

Annual
CMSME Credit Disbursement Target.
Quarterly (Monitoring)
Disbursement Statement
Cluster Financing
Industrial Loans and Advances
Credit to Agro-based Industries

EDW (Online Reporting)


EDW Output Format
Disbursement Target
Quarterly Disbursement Statement
Quarterly Statement of Cluster Financing
Quarterly Statement of Industrial Loans and
Advances
Quarterly Report of Bank Credit in Agro
Based Industries
Online Reporting

EDW
Online Reporting-CMSME
Finance

Banks and FIs


are now
submitting
returns to BB
both in hard
copies and
online through
EDW (Enterprise
Data
Warehouse)
network.

EDW will be
fully effective
from 1st quarter
of 2017.
Online Reporting-CMSME
Finance

EDW Output Format


Tk. In Crore

Sl. Name of SME Target Cumulative Achieveme Total Balance


No. Banks/NBFI for 2016 Disburseme nt Outstan Outstan
s nt ding ding of
balance CMSME
of Loans loan
and
Advance
s
No. of Amou
Ent. nt
1 2 3 4 5 6 7 8
State-Owned Banks
1
Agrani Bank
2
BASIC Bank
3
Janata Bank
4
Rupali Bank
5
Sonali Bank
Sub-Total
Online Reporting-CMSME
Finance

EDW Output Format


Tk. In Crore

New Enterprise Outstandin Disburseme Outstandin Recover Recover


(NE)Financing g of NE nt without g for WC able y
Financing collateral Amount Amount
(WC)
No. of Amount No. of Amou
Ent. Ent. nt

9 10 11 12 13 14 15 16
State-Owned Banks

Sub-Total
Online Reporting-CMSME
Finance

EDW Output Format


Tk. In Crore

Outstan Recover Classi Rural Cottage Micro


ding for able fied Disbursement
Refinanc Amount Amou No.
e nt Amount

17 18 19 20 21 22 23 24
State-Owned Banks

Sub-Total
Online Reporting-CMSME
Finance

EDW Output Format


Tk. In Crore

Small Medium Service Trade Manufac Disbursement to Women


turing

No. of WE Amount

25 26 27 28 29 30 31
State-Owned Banks

Sub-Total
Concluding Remarks

Within the span of six years the


annual disbursement increased
by 116%.
The Outstanding CMSME credit
increased from Tk. 69,527 crore
in 2010 to Tk.160,659 crore in
September 2016.
More than 20,000 new women
entrepreneurs created in 2015 &
2016.
More and more credits are being
Thank
you

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