Call to lower borrowing costs for smaller firms

Speakers at a program on Saturday said lenders and digital financial technology service providers need to team up to help slash borrowing costs for smaller firms.

They said cottage, small, and medium enterprises have enormous potentials in the country and banks can tap those potentials by lending low-cost funds.

The speakers also called for easing procedural course to help such enterprises grow.

The call came at a seminar held at the Bangladesh Institute of Bank Management (BIBM) in Dhaka.

In co-operation with IPDC Finance Ltd, Bangladesh Bank organized the seminar on "Digital Financial Services: Innovative Techniques in Developing (them)and Bank Management."

Chief external and corporate affairs officer of bKash Limited Sheikh Md Monirul Islam presented a keynote paper on the topic.

He said the smaller enterprises contribute 25 percent to a gross domestic product, or GDP, while in middle-income countries, this rate is as high as 60-70 percent.

In the OECD countries, the rate is 55 percent, India 80 percent, and Japan, China, South Korea 47-70 percent.

"So, there are enormous potentials for smaller enterprises' contribution to GDP," he said.

He said 59 percent of potential demand in the smaller firms has never been realized due to a lack of access to finance.

Mr. Islam thinks digital financial service can easily reduce the cost of funds, which is recognized as the biggest barrier to having access to finance for small enterprises.

He said bKash is ready to intervene in the process by collaborating with financial institutions, banks, MFIs to reach out to such firms with the low-cost fund.

General manager of Bangladesh Bank Lila Rashid moderated the event.

Mominul Islam, managing director and CEO of IPDC Finance Ltd, said, "We haven't reached the stage of incorporating the required amount of technology in this sector."

He said digital networking should be taken forward.

"Trade license stands in the way of small entrepreneurs getting loans. If this problem is addressed, they would get credit very easily," he said.

Mr. Islam said the cost of the fund should be 1.0 percent for small businesses.

"Only digital financial service can ensure that cost," he said.

Bangladesh Bank general manager Md Mejbaul Haque said the use of digital technology solves the problem of fund crisis being encountered by the entrepreneurs, problems in innovation at digital financial services, and glitch at the control structure.

He said digital financial service prices should be nominal so that they can avoid a lot of administrative processes.

He said Bangladesh Bank is already working in four sectors.

"We hope to ensure that the entrepreneurs avail loan from home."

He also said they are working on electronic KYC (know your client) and will soon roll out the electronic form.

Dutch Bangla Bank Limited COO Abdur Rahman Sikder and SSL Wireless Ltd Director and CEO Ashish Chakrabarty, among others, spoke at the seminar.