The small and medium enterprise (SME) sector is highlighted in seminars and workshops as a key to promote access to finance for the poor. This enthusiasm, however, is not matched by the response in the commercial banking circles. They are traditionally averse to any prescription for extending their outreach to the poor. The age-old principle of the commercial banks is to 'lend money to one who does not need it'. On the other hand, the poor needs money -- needs it badly, too.
The term 'inclusive growth' is new but the idea behind financial inclusion through the banking system is old. Many programmes were initiated mainly to gain political mileage during the 1970s and 1980s, an era marked by a plethora of directed credits. One was ambitious agricultural credit programmes that were launched, especially on the eve of the elections, through the dysfunctional agricultural financing banks and at a later stage, state-owned commercial banks (SoBCs). The programmes provided an opportunity to the bankers to harvest a bonanza, allegedly at the rate of around 20 per cent of the loan amount, in joint collaboration with the rent-seeking middlemen. The programmes predictably ended with infusion of tons of the Bangladesh Bank's high-powered money through its liberal refinance windows. While it got back only a fraction of the refinance money, the poor farmers remained poor and still continue to remain so. New incremental credits are, of course, given from time to time but these are mostly to repay the old debts to give a healthy look to the statistical data on disbursement and recovery.
Special programmes were also launched for weavers and fishermen which saw mushrooming of fake groups of fishermen and weavers, with political tags of one kind or the other, depending on the party in power. Makeshift fishing nets and handlooms were rotated from premises to premises for verification by the sponsoring agencies regarding their genuineness in the stated vocations. One Tk 1.0-billion programme was launched again to patronise political elements for reviving the cooperative societies through a loan directly from the central bank. It did not revive the societies but, to use an oft-quoted cliché, swelled the pockets of vested interest groups. An International Development Association (IDA) credit, famously known as IDA Credit 1165-BD, was initiated for promotion of small industries through banking system under the Bangladesh Bank guarantee for sharing the loan losses. It also met the same fate. These are just a few of the directed credits that ended in fiasco. We hope, nevertheless, that the new paradigm for financial access through SMEs does not go the way its preceding ones did.
The idea to provide financial services for two billion poor people of the world was initiated in the Pittsburg summit of G20 countries in September 2009 and further crystallised in the Seoul summit in November 2010. The summit's signal set the SME ball rolling across the world. Bangladesh responded to the signal with usual enthusiasm. The donors and a litany of consultants hop in and out of the country with money and wisdom to promote the idea. The government has set up a SME Foundation while the central bank has created a SME and special credit department in right earnest. The banks too have been asked to open dedicated desks in their branches, with a separate one for the ladies headed by a lady officer. The SME has truly taken on a carnival look in the country's landscape.
In spite of many constraints stacked against it through dilution of its authority, the central bank, under the stewardship of its dynamic and innovation-loving Governor, has achieved impressive successes by implementing many projects like mobile banking, nationwide cheque clearing platform and green banking. However, the SME programme is a different ball game and appears to be plodding along with faltering steps.
Part of the reason is that the programme itself does not look like one dedicated to the poor. The Better Business Forum, created by the Fakhruddin-led caretaker government, is credited with setting the criteria for defining SME. A cursory look at those criteria would show that they must have had their peers in the elite group of borrowers in mind while preparing their recommendations. There is not much that one can read in the programme to relate it to the small and medium enterprises. The criteria are as follows.
