Introduction
Poverty remains an enveloping feature of Bangladesh. Despite variation in statistic of poverty from various sources, it can be said that about 50% of the total population still lives below poverty line and the existing poverty situation is directly associated with the underdeveloped conditions in social, political and economic sectors. As a result, the issue of poverty reduction has obtained top position in government’s development agenda but this development goal can only be achieved by engaging the entire population in economic and productive activity. Given that women comprise 50 percent of the population, the issue of participation of women in the business and industry sector in Bangladesh is imperative. Despite this demographic structure, the level of participation of women in the mainstream economy remains insufficient. One of the positive things could be mentioned here that a good number of women all over Bangladesh started entering into the mainstream economy as small and medium entrepreneurs. Over the last ten years, women mobility in formal economic sector has become more visible. They have already proved their potentialities as entrepreneurs and are contributing to the national growth despite different types of socio-cultural and economic barriers are still hindering the development of women, particularly women SME, in economy. Women entrepreneurs face myriad of obstacles including limited access to finance, market, business network, training as well as the double burden of raising a family and running a business simultaneously.
As said before, lack of access to finance is one of the major barriers for women entrepreneurs in Bangladesh although capital is the lifeblood of any entrepreneurial activity. Considering the importance of this issue, this paper aims at examining the problems and prospect of women entrepreneurs in Bangladesh regarding access to finance. The paper is developed primarily based on some experiential learning observed by the author over the last five years all over Bangladesh through the implementation process of different activities undertaken by Bangladesh Women Chamber of Commerce and Industry (BWCCI) for promotion of women entrepreneurs. Primarily qualitative information, obtained in consultation with different stakeholders at focus group discussions, seminars, roundtable meetings, interactive discussions organized by BWCCI in Dhaka, Chittagong, Rajshahi, Sylhet, Barishal and Khulna, is used in this paper to analyze the issues under the main topic.
Access of Women Entrepreneur to Finance: Major Problems observed
It is observed that access to finance is a major challenge for starting up a business, particularly for women entrepreneurs. This is a very common and one of the largest impediments to all women entrepreneurs irrespective of their station either in rural or urban areas. This barrier is preventing them from the expansion of micro enterprise into larger business. The major problems related to access of women SME to finance observed by the participants in different events of BWCCI are as follows:
• Access of women SME to formal financial and credit facilities is very limited. Family and other informal sources were found to be main sources of capital, particularly starter capital, for women SME.
• Women SME have to face delayed and complicated procedures to get loan from the mainstream banks and financial institutions and these procedures required extra time and money. On the other hand, the interest rate/service charges are higher for loan from informal sources although it is easier to get loan from informal sources.
• Women SME face various complexities at commercial banks despite all required procedures are followed and relevant papers are provided by them. The main reason behind this is that the respective persons working in commercial banks are not sensitized enough regarding women SME. Women are not considered as creditworthy.
• Husband is asked to sign as guarantor while wife goes for loan from formal financial institutions but husband need not wife as guarantor for the same purpose. This is a discriminatory procedure against women which creates dependency of women SME on male counterpart.
• Existing conditions and procedures of formal financial institutions are complicated for women SME even loan application form is not easy for local women to understand it.
• Some private commercial banks have recently initiated SME loan but their service charges/interest rates are higher. As a result, this SME loan cannot play expected roles for promotion of women SME.
• Public commercial banks are running their activities under the guidance of Bangladesh bank. Since central bank had no special guidance for women SME for a long time, respective public commercial banks were unable to do something special for women SME.
• The constitution of Bangladesh has guaranteed equality for both men and women in all sphere of social and economic life but the reflection of this provision is still absent in various procedures and activities of private and public commercial banks.
• The ongoing activities on SME development are biased towards male and urban areas.
• Women SME are not aware of formal procedures of financial institutions even some of them do not know the name of institutions where they can go for a loan support.
• Public and private commercial banks lack appropriate and effective procedures to disseminate relevant information about their existing facilities to women SME. As a result, women SME remain excluded from existing facilities.
• In most cases, women SME cannot prove their potentialities with required documents like trade license, bank accounts, bank statement, etc. while they go for loan to formal financial institutions.
• Various public institutions/departments are running micro credit under their poverty alleviation program but the amount of loan is very small therefore it cannot contribute to SME development.
• NGO provided micro credit is playing very vital roles in reducing income poverty level but it is still insufficient for women to develop themselves as SME. The provision of weekly installment and higher service charges are also barrier to the development of women SME.
• Banks require a minimum of two years of trade license as a precondition for loan. It is difficult for new women SME to fill up this condition as most of them do not have any trade license. As a result, they are kept excluded from credit facilities for a long time.
Bangladesh Bank’s Circular: A drop in the see of expectation
In response to the long waited demand of women entrepreneurs, Bangladesh bank issued a circular named ‘Refinancing Scheme for Women SME’ on 7 February 2007. This circular has adopted several important provisions for women SME including reservation of 10% of its aggregate small and medium enterprise loan funds, lower rate of interest, collateral free loan up to BDT 1.5 million, etc. From the policy perspective, this circular should be termed as milestone for women entrepreneurs in Bangladesh. Over the last five months, BWCCI consulted with different stakeholders on this circular and identified following important issues:
• Most of the people working with different banks and financial institutions at branch level are not informed of this circular.
• There is no mechanism by the central bank or any other banks to disseminate the information to women entrepreneurs. As a result, women entrepreneurs are not aware of this circular. Due to lack of information, women SME, particularly women in rural areas, are unable to apply for loan from this fund.
• Some banks seemed to be reluctant to use the money from SME fund under this circular.
• The fund under this scheme is very limited to provide supports to women SME considering their numbers and need.
• Banker reported that having fund from central bank might take times as they experienced the same thing earlier.
• Women are in need of getting their company registered separately to get loan facilities under this circular but a number of women have partnership with their husband or other male members from family or kinship group. So, the women belong to this group cannot enjoy loan facilities from this fund.
• Women entrepreneurs contacted by BWCCI so far reported that they did not received any loan under this fund.
Considering the challenges of this circular, different stakeholder also provided some suggestions for proper execution of this circular as follows:
• Central bank and respective authority should supervise the implementation process of this circular.
• Develop a monitoring system to over see the progress of this circular.
• Disseminate information related to this circular to women entrepreneurs, particularly rural women.
• Central bank should take measures to speed up the financing procedures to respective bank in order to ensure timely disbursement of loan for women SME.
• Respective banks and financial institutions should come forward to implement this circular.
• Increase fund for women SME considering their number and needs.
• As part of corporate social responsibility, banks should consider the context of women in Bangladesh and come forward with possible cooperation.
• Central bank should fix up a target for each bank to provide loan to women SME.
Recommendations and Conclusion
It can be reiterated that access to finance is essential but it is also a great challenge. In order to address this challenge, following recommendations are made:
• Establish a well-designed comprehensive credit policy by the central bank keeping necessary provisions for women SME including collateral free loan, low interest rate, long term, flexible repayment schedule.
• Establish a separate bank for women entrepreneurs. The than prime Minster announced at first ever national conference of women SME to establish a separate bank for women SMEs. Execution of this announcement will accelerate the development of women SME through their increased access to formal financial institutions.
• Ensure the provision of pre and post loan and investment counseling by bank and financial institutions. This service will increase the efficiency of financial management. The monitoring of fund will also assist in identifying genuine women entrepreneurs, preventing the use of loan by other family members, for non-business process.
• Maintain a minimum quota for loan disbursement to women entrepreneurs and proactively seek out female clients.
• Raise the micro finance loan ceiling.
• Create a gender friendly environment at all banks and financial institutions.
It is observed that women entrepreneurs are creative, viable and able to contribute to the progress of the nation. They need only an enabling environment that facilitates their development as entrepreneurs. It can be said that entrepreneurship to women is more than just income generation. It is about to build a more prosperous country, to lift the many millions of Bangladesh people out of poverty. It is about achieving economic independence and women’s empowerment. Therefore, we, from all walks of life, should come forward with our extended cooperation towards women entrepreneurs to build a prosperous nation.