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65 per cent goes to unproductive sector

KM Zamir Uddin

SME loan disbursement by the banks and non-bank financial institutions increased by 22.32 per cent in 2013 from that of 2012 although major amount of the loans went to trade or unproductive sectors bypassing the manufacturing zone, according to BB data released on Thursday.
Experts said that the major financial goal of small and medium enterprises could not be fulfilled due to the higher loan disbursement trend in the trading sector than the manufacturing sector.
The higher loan disbursement in the trading sector usually put a lower impact on the country’s overall economy as such type of investments fail to cerate employment generation.
The BB data showed that all banks and NBFIs had disbursed a total of Tk 85,323.25 crore in SME loans in 2013 against Tk 69,753.32 crore in 2012.
The SME loan disbursement by banks and the NBFIs had increased by 28.22 per cent to Tk 56,703.72 crore in the trading sector in 2013 against Tk 44,222.65 crore in 2012.
The trading sector got 66.65 per cent of the total SME loan disbursement in 2013 while it got 63.40 per cent in 2012.
The higher loan disbursement ratio indicated that the banks were more interested in the trading sector, a BB official told New Age. 
The banks and the NBFIs disbursed Tk 24,016.64 crore and Tk 4,602.89 crore in manufacturing and service sector respectively in 2013 against Tk 21,896.33 crore and Tk 3,634.34 crore in 2012.
The manufacturing sector got 28.15 per cent of the total SME loan disbursement in 2013 although the sector got 31.39 per cent in 2012.
The BB official said that the SME loan disbursement had increased significantly in the concluded year but it created little impact on the country’s industrialisation process.
Centre for Policy Dialogue executive director Mustafizur Rahman told New Age that the BB should take initiative to increase the loan disbursement in the manufacturing sector as such type of investment would play a significant role in creating employment generation.
The banks and the NBFIs usually disburse loan in the trading sector due to lower risk and secure their profit, he said.
The BB should open a dedicated window to monitor the manufacturing sector so that the business people would be encouraged in investing more in the sector, he said.
Former BB governor Salehuddin Ahmed said that the higher loan disbursement in the trading sector would not create a sustainable financial development as it hindered the industrialisation process.
Although higher loan disbursement in the trading sector will impact the economic growth, it will fail to create expected output, he said.
The central bank should convince the banks and the NBFIs so that they disburse more loans in the manufacturing sector than the trading sector.
Syed Mahbubur Rahman, managing director of BRAC Bank, which is one of the largest SME loan providing banks, however, said that the trading sector also played a major role in the economy as the country’s largest manufacturers had initially started their business with trading.
Trading also plays an important role in expanding the manufacturing sector, he said.
The major portion of SME loan went to trading sector as number of traders in the country is higher than the manufacturers, he said.

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