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Ex-BB chief stresses evaluating banks1 SME lending

Star Business Report
A former centr.il bank governor has pointed out that Bangladesh Bank needs to consider local commercial banks' performances in SME (small and medium enterprises) lending when it prepares CAMELS rating to boost up their participation.
"The government should take some performance-based measures to encourage banks and non-bank financial institutes to come to help SMEs get more access to finance, " said Dr Salehuddin Ahmed, suggesting introduction of a sub-section in the present CAMELS rating to initiate the measures immediately.
The inclusion of SMEs in such rating will certainly mount pressure on banks to raise transactions for the sector, the ex-BB boss elaborated.
He also sought government's intervention in lowering interest rates on the amounts borrowed by SMEs.
Ahmed was speaking at a seminar on 'Access to SME Financing: Reforms in Policy and Regulatory Framework', jointly organised by Dhaka Chamber of Commerce and Industry (DCC1) and SME Foundation in the capital.
The CAMELS rating indicates per formances of banks in Capital, Asset, Management, Earning. Liquidity and Sensitivity.
Salehudin Ahmed also suggested the government take a holistic approach, which will include training marketing, business advisory services, technical services and access to information to enhance growth of the sector.
In this context he cited the examples of Korea, Taiwan and India where governments encourage banks in sourcing capital for small and medium enterprises.
HT Imam, prime minister's adviser on establishment ministry and administrative affairs, said banks have to ensure credibility with more SME activities to give a boost to economic growth.
"The banking system should be more SMEs-friendly. as 80 percent of the country's total industrial units falls in this category. At the same time, the government should consider boosting SMEs to create more employment," hesaid.
Imam suggests banks ease conditions to give loans to women entrepreneurs to create more opportunities for them, as their repayment rate is higher.
He urged both the public and pri-
vate banks to disburse collateral-free loans to small and medium entrepreneurs at low interest.
In the SME fair concluded yesterday, as many as 26 banking and other financial institutions participated to showcase financial products and programmes.
The World Bank gave Tk 112.32 crore grants, including $10 million for refinancing the SME sector, to Bangladesh in the fiscal year 2008-09. A total of Tk 206.39 crore has been disbursed among 2,341 SME entrepreneurs from this fund through 14 banks and 14 non-bank financial institutions.
Aftab-ul Islam, chairperson of SME Foundation, said the large-scale industries of Bangladesh could contribute only 12 percent in the total employment generation, while the SME sector accounts for the remaining.
"So, the sector deserves more government policy support, which will help remove all institutional and policy barriers and help advance the sector," hesaid.
Muhammad Abdul Mazid, former chairman of National Board of Revenue (NBR), and Zafar Osman, president of DCCI, also spoke.