Results of the Banking Survey of the SME Market in Bangladesh Sector Report
SouthAsia Enterprise Development Facility (SEDF)
Results of the Banking Survey of the SME Market in Bangladesh Sector Report February 2006 © PA Knowledge Limited 2006
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ACKNOWLEDGEMENT We express our sincere gratitude to the entire SEDF team, especially Mr. Gilles Galludec, Program Manager, and Ms. Awhona Choudhury, Financial Market Specialist, for their support, involvement and encouragement in the preparation of this document. We also thank financial institutions, industry associations and SMEs who participated in this survey.
Sector Report – Results of the Banking Survey of the SME Market in Bangladesh
Foreword… FOREWORD The SouthAsia Enterprise Development Facility (SEDF) is a multi-donor funded initiative to support the establishment and growth of private small and medium sized enterprises (SMEs) in Bangladesh, Bhutan, Nepal and northeast India. SEDF is managed by the International Finance Corporation, the private sector arm of the World Bank Group. Through past interactions with Banks and Financial Institutions (FIs) and during various programs conducted by SEDF on SME sector development in Bangladesh, non-availability of information on characteristics and behaviors of small and medium sector participants has been highlighted as a key bottleneck. To bridge this information gap, SEDF has decided to establish a comprehensive project designed to improve understanding of the issue of SME financing from the banker’s perspective. To achieve this goal, SEDF mandated a consortium of three consulting firms led by PA consulting Group along with e-Gen Consultants Ltd. and Micro Industries Development Assistance and Services (MIDAS) to conduct a banking survey of the SME market in Bangladesh. As a result of this survey, a large volume of data was compiled regarding key features, financing needs and financing sources of 14 SME sectors including women-led enterprises as well as SME owners’ perceptions of their relationship with banks. This report presents the survey results by industry sector. It is structured as a practical summary of the data collected on the 14 SME sectors surveyed. For each sector, the report provides: 1) a sector overview with profile of firms and owners; 2) a sector benchmarking of financial ratios vs. average of all SMEs under study; 3) a risk profile of the sector along two dimensions: business risk and financial risk; 4) a summary of key financing indicators illustrating the extend of access to finance in the sector, and 5) a high-level recommendation on lending strategies. The ultimate goal of this sector report is to provide a practical and useful source of SME information that can help financial institutions better target, structure and underwrite loans to the SME market in Bangladesh.
TABLE OF CONTENTS Foreword Sector 1. Sector 2. Sector 3. Sector 4. Sector 5. Sector 6. Sector 7. Sector 8. Sector 9. Sector 10. Sector 11. Sector 12. Sector 13. Sector 14. Ready-Made Garments—Woven Ready-Made Garments—Knitwear Textiles—Spinning Textiles—Weaving Light Engineering Agro-Processing Frozen Food Processing Pharmaceuticals Poultry Agro-Machinery Shopkeeper Software Plastic Goods Women-Led Enterprises i 1 13 25 37 49 61 73 84 96 108 120 131 142 154
Appendices APPENDIX A: List of Associations APPENDIX B: Glossary of Financial Terms A-1 B-1
Sector Report – Results of the Banking...