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Big plan for SME loans

Prime Bank boss reveals

Sabadur Rahman
Prime Bank Limited has planned to provide Tk 1,000 crore loans to the country's small and medium enterprises (SMEs) this year for more employment generation.
"Interest rate is not an important issue, making credit avail able to the SMEs is vital,” M Ehsanul Haque, the bank's managing director, told The Daily Star in an exclusive interview yesterday.
Prime Bank, the local fastest growing private commercial bank (PCB) that was set up 14 years back, has been keeping up its growth over the years. The bank's overall assets increased 39 percent last year.
Its operating profit reached Tk 424 crore in 2008, the highest among the PCBs after Island Bank Bangladesh Limited.
SME and retail loans also increased 64 percent and 112 percent respectively last year, compared to the previous year.
Prime Bank's top official sees a bright prospect for the SMEs, pointing to the fact that many countries, such as Japan and Taiwan, have made their fortunes with the help of this sector.
“We have already set up a separate SME Division, now a good team will be there to exploit the business potential,” Haque said.
However, the career banker thinks that it would not be so easy to lend to such enterprises because of the risks involved in the lending.
"Ignorance of the SME people and the higher cost of doing business are two major risks the banks face,” he said.
Banks have to keep higher provision for the SME Ioan portfolio compared to that from other sectors, M Ehsanul Haque further pointed out.
When his attention was drawn to the high interest rate, he said it is not possible to lend to the SMEs at 10-12 percent interest because the
cost of funding is much higher.
In this context he put emphasis on concerted efforts of banks, the central bank and the government to help SMEs to have a sound footing.
“Tax rebate can be an encouraging factor for banks to lend more to the sector,” Haque made another point.
The Prime Bank boss also spelt out his plan of an enhanced farm credit, which aims at giving a boost to the agriculture sector. And, some 15 branches will be assigned to serve the purpose, he said.
The MD also dwelt on the issues like consumers credit and the central bank's view on it, how
more people can get into banking channels and remittances be properly used and marketing of bond by private banks.
Disagreeing with the central bank's caution against the rapid rise in consumers lending, Haque said it creates demand. "And demand increases the supply,” he asserted.
The senior banker considers the entry of the new generation into the business arena as the path to a good business this year amid an economic crisis that has rattled the developed world, the main consumers of products manufactured by developing countries.
On the lesser amount of divi-
dend his bank declared for its shareholders for the year 2008, which is 25 percent against 35 percent in 2007, Haque said, “Increase in tax and deferred tax provision have caused such a reduction.
However, he has assured the shareholders of a benefit next year from this deferred tax.
Prime Bank MD also laid bare the bank's plan to tie up with different non-governmental organi sations to render quicker services to the beneficiaries of remittances.
Haque suggested the government create wage earners' bond for the welfare of the remitters. "Some private banks may play a
complementary role in marketing this bond,” he said.
On a query on the possible fallout from the ongoing global recession, especially in exports, he said, “Orders from buyers have not gone down, the prices have declined.”
Haque, who is seemingly upbeat on the young entrepreneurs, said, "They are western educated, more positive and skilled, both in technical and managerial aspects, than their predecessors."
“I see the future of Bangladesh pretty good,’ he said.
sajjad@thedailystar net