SME Financing and its importance in our economy (A study on IDLC Finance LTD.)

Abstract

SME stands for small and medium enterprise which is much more related to offering loan to the entrepreneur or existing business who are really willing to develop there business with the flow of time, innovation, technology as well as competitive market. It is very important and crucial for overall development of the economy of the country. SME financing has developed a lot for last several years. In a study it is found that in SME sector the loan recovery rate is much more higher compared to the large organization loan which is also large in amount. Moreover SME contributes a large amount of invested capital over the capital and financial market. These issues have made the SME sector very investment friendly to many financial institution. As a result many financial and non financial institution now actively contributing to this sector to develop themselves as well as to develop the financial condition of the country. While collecting information of contribution of SME in the economy of the county I found out that SME contributes to the extent of 25% of the GDP in Bangladesh , about 40% of the gross manufacturing output ( Majority in small and medium industries), 80% of industrial job and around 25% of the total labour force. The total number of SME entrepreneur is about 6 million (National private survey of enterprises in Bangladesh 2003, A study conducted by USAID, DFID and CIDA). The study also claims that the SME sector is a significantly growing sector in the financial market of Bangladesh. Industrial Development Leasing Company (IDLC) of Bangladesh limited started its mission to develop the industrial sector of Bangladesh by offering lease in 1985 as a pioneer leasing company. Over the year the company has evolved itself as a multi product non-banking financial institution providing a large range of services related leasing. Over the last two decade it developed a lot and it is increasing the portfolio of its SME sector following generic business growth model. Now its portfolio is about 2000 cr according to the result of may 2015. Its vision is to make the portfolio of SME doubled within the next eight years. IDLC is the second largest SME portfolio holder after BRAC Bank and it is the top one among the NBFIs.