Evolving SME banking in Bangladesh : through BRAC bank ltd. and its comparison with other four banks
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Small & Medium Enterprises (SMEs) are important to almost all economies in the world, especially to the developing countries as they face major employment and income distribution challenges. There are about 60 lakh SMEs and microenterprises in Bangladesh, according to Asian Development Bank. In recent times, SMEs have come into the forefront of development agenda due to the recognition of their contribution in fostering growth, sustaining global economic recovery, generating employment and reducing poverty. Both micro-finance institutions and banks are beginning to realize the potential of SME market and are designing new financial products for it. Some banks and other financial institutions had been providing loans to such enterprises for long, though not in the classification of SME Financing. Now, almost all banks and non-bank financial institutions (NBFI) in the country are providing loans to the sector, under different governmental schemes as well as through their own product portfolios. BRAC, the largest private development organization of the world, believes that micro finance is an important tool in breaking the cycle of poverty. BRAC realized that there is a vast group of small and medium entrepreneurs in the country, who have no access to institutional credit. Upon realization BRAC introduced a full-fledged commercial bank- BRAC Bank, in July 2001. BRAC Bank‟s effort is noted in this regard for its complete focus on the credit needs of the small and medium enterprises. Since the initiation of SME operations by BRAC Bank, it has become the Bank‟s largest and most profitable venture. BRAC Bank is the largest SME Bank in the country and 4th largest SME Bank in the world in terms of outstanding loan amount. In its 11 years of operations, it has disbursed Tk 22,000 crore loans to 4 lakh SME entrepreneurs across the country through 553 customer touch points (SME Unit Offices, SME Sales and Service Centers, Krishi Branches, and Branches. The finance has created direct employment to 13 lakh people and it has a SME customer base of more than 3 lac people. This report aims at analyzing the current SME financing status and BRAC bank‟s contribution in SME banking. Moreover a comparative analysis had been done to compare BRAC bank‟s SME banking with four other private commercial banks which also have good name in terms of serving SMEs. The comparison is done in terms of SME Banking establishment period, availability of SME customer touch points, SME product differentiation etc. Although there can be no comparison with the largest SME bank of the world, BRAC Bank Ltd but the report brings out the evolving SME banking of these four banks which has some special features which can lead them in successfully attracting SME customers.