SME banking of Jamuna Bank Limited

Abstract

SME financing is an important sector of banking activities. It is said that Small and Medium Enterprises (SME) account for about 50 percent of GDP and 60 percent of employments. SMEs are projected to contribute between 25 and 35 percent of world manufactured exports. Financial Institutes around the world are relentlessly trying to enhance the SME exposure in their groups. Jamuna Bank Ltd. (JBL) is a third generation bank which started its operation on 3rd June 2001 as a scheduled Bank. Over the years Jamuna Bank Ltd has expanded the financing exposure all over Bangladesh. SME sector is one of them. Although all over the world, the importance of SME financing is highly appreciated and entertained, this sector lacks proper boost from the government and attention of financial organizations. There are many reasons that financial organizations especially banks are unwilling in financing to the small and medium enterprises. Jamuna Bank Ltd is currently motivated hard to enhance the SME exposure of the bank. A questionnaire survey was conducted on a selected portion of SME clients to find out the actual scenario of SME financing in JBL. The survey reflected the demographic profiles of the selected portion of the clients like the age, educational background, the problems they are currently facing, proprietors' perceptions about JBL SME, waiting period for the loan etc. From the survey, the most significant observations found were, most of the proprietors are in range of 30-50 years of age, the SME loan is mostly used for purchasing raw materials by the proprietors, lengthy system is the most common problem of JBL SME pointed out by the proprietors. Interview with the SME bankers open the problems they face during the SME management. According to them the highest problems for them were limited opportunity to offer flexible repayment options, confusion with borrowing terms and conditions, incorrect information regarding the borrower, security risk, documentation risk, risks in unsecured lending and monitoring activities. The comparative analysis of JBL's performance in SME sector reveals that the bank is relentlessly trying to increase the SME portfolio as shown in 2010 & 2011. In recent years JBL is quite successful in developing themselves as a successful bank in SME sector of Bangladesh.