Borrowers' Perception: SMBEs Financing by the Banking Sector of Bangladesh

Abstract

Bangladesh is trying to transform her economy from low income group to upper middle income group economy. Small and Medium Business Enterprises (SMBE) will be the key driver, steering this transformation of the Bangladesh Economy. This is due to the fact that Small and Medium Business Enterprises (SMBEs) can not only be enterprising and innovative, but also create employment, purchasing power capability, raise overall per capita income, empower the owners of SMBE- specially women and improve standard of living. Though SMBEs operate directly in the formal sector, but they also form indirectly a part of the informal sector and have a multiplier effect on the formal sector. The main purpose of this study is to investigate whether SMBEs financing through the formal banking sector, to the borrowers, is supportive as per their perception? Quantitative and Qualitative methodology were adopted to analyse both, the primary and secondary sources of data. Time period of the study was from 15th November, 2014 to 31 March, 2015. A questionnaire was prepared which was divided into three parts: demography; simple binary data and Likert Scale were applied. Total numbers of respondents were 308. On the basis of binary data, logit regression model was also tested. Result shows that SMBE loan has positive impact on creation of employment opportunity and income generation. From the Likert scale we observed borrowers’ perception and mindset. Further, we analysed the secondary data which indicated that there was a direct positive relationship between the number of women entrepreneurs’ and the recovery rate- that is lower the number of women entrepreneurs, lower is the recovery rate. The paper suggested a model for SMBEs.This paper further provides few policy implications and recommendations such as; policy makers of the country ought to keep supporting SMBEs through enhanced institutional support, infrastructural support, ease of application procedure of SMBEs. SMBEs financing should be raised in the green business and environmental friendly industries, creation of more women entrepreneurs, corruption free banking system, corporate governance and favourable guidelines and policies regarding SMBEs funding and expansion of businesses at domestic and international level.