Bridging the Gap between Microfinance and SME Financing in Bangladesh: Unlocking the Potentials

Abstract

The SME sector has significant contribution in the GDP of Bangladesh. But this sector is not getting wide attention from the policy makers and mainstream financial institutions. Although the Microfinance industry of the country has reached its maturity stage, it is yet to contribute remarkably for SME development. Uplifting the Microfinance clients to SME level is a big challenge for MFIs. Various constraints especially inadequate financing hinder the growth of SMEs. The most important issue that needs to be addressed is bridging the gap between Microfinance and SME financing. Up scaling the program of MFIs and downscaling the financing process of banks and non-bank financial institutions are important to bridge the gap and to tap the microenterprise clients, who have been identified as missing middle. To strengthen the SME sector favorable government policy, smooth funding, business development services and backward and forward linkage are essential. If the SME sector could be boosted, it will contribute to the overall macroeconomic growth of the country.