Bangladeshi female entrepreneurs struggling because of rigid loans policy

Women-led enterprises in Bangladesh have long faced policy hurdles in accessing finance from formal channels which have become a double blow for survival during the coronavirus pandemic.

Moreover, financial institutions are also reluctant to provide loans to women entrepreneurs, including under government announced stimulus packages, according to experts and business insiders.

Only 5.59% of the government announced Taka 200 billion ($2.3 billion) stimulus package recipients for the small- to medium-sized enterprises (SME) sector are women, and they are mostly urban-based.

SMEs are estimated to lose 66% of their revenue during the COVID-19 pandemic compared to the pre-pandemic period, according to the Bangladesh Institute of Development Studies.

And, women-led enterprises were more vulnerable during the crisis, which forced them to lay off more workers -- about 50% of enterprises have reported laying off 76%-100% of workers in Bangladesh, said the Asia Foundation.

- Women run SMEs face hurdles in availing stimulus

Shamima Shirin Laizu, Senior Vice President of the Women Entrepreneurs Network for Development Association (WEND) told Anadolu Agency that female entrepreneurs experienced a double blow during the pandemic compared to their male fellows.

“The existing conditions and set of rules in availing the government stimulus from commercial banks remain complex for women entrepreneurs. Complex documentation process, mandatory bank guarantors and two-year matured licenses as conditions are among the challenges for women to secure bank loans.”

We met the Bangladesh Bank authorities and representatives of private commercial banks but they disagreed to ease condition for loans, said Laizu, who is the owner and designer of TRIMATRIK and Director of Purple Food and Agro Limited.

“Banks should change their mindset toward women for being bankable,” she said. “Bangladesh must take its women citizens to walk on the same road to meet the SDGs (sustainable development goals) goals and to successfully graduate from LDCs (least developed countries).”

Local thinktank Centre for Policy Dialogue (CPD) Research Director Khondaker Golam Moazzem told Anadolu Agency that the government stimulus for SMEs could cover 6%-7% of total SMEs in Bangladesh.

“The central banks suggested to disburse at least 5% of this stimulus package during the pandemic period and banks disbursed the loans mostly to their previously known clients and wanted to keep it with only 5%.”

But the government industrial policy toward women entrepreneurs is to 15% and if we consider the proportion of women-run SMEs, women experienced double discrimination in the pandemic, added Moazzem.

“Banks disbursed the loan on market-based and based on the banks’ relation with known clients, but they should have distributed loans from the stimulus based on social commitment and corporate social responsibility (CSR) in the crisis period,” according to the renowned economist. “Furthermore, the government provided a market-based instrument of further a 2% credit guarantee scheme to support banks considering the crisis period. But banks did not come forward as expected toward women entrepreneurs in the pandemic period.”

- Policy support needs to engage banks, allow easy access

The urban-biased policy intervention does not seem appropriate during the crisis period.

During the pre-pandemic period, the SME sector received on average Taka 1.69 billion ($19.5 million) crore credit every year. Of these, only 4% had been disbursed to women borrowers, according to a recent study by CPD.

Meanwhile, the majority of SMEs do not have bank transactions. Only about 30% of SMEs have bank accounts which disclosed the gap between banks and SMEs, added Moazzem, saying traditional bank guarantors to avail loans is a barrier for women.

Entrepreneurs, mostly women, have been vocal about the disbursement of stimulus or fund money through Microfinance Institutions (MFIs) as it caused less hassle, documentation, verification, guarantors and bureaucratic hurdles despite comparatively low interest rates from banks.

Moazzem suggested removing barriers and easing the process in seeking loans from banks.

Bangladesh, from all sectors, is trying its best to achieve SDG goals but if we interpret those in a gender dimension then there is still more to be done and Bangladesh will have to start anew with policy support to women entrepreneurs, according to Moazzem.

- Gov't claims gradually meeting demands

The government SME Foundation General Manager Farzana Khan also emphasized changing the mindset of commercial banks.

Women need policy support and easy access to get bank loans and that is not a big amount, she said.

“The SME Foundation is conducting training on documentation to seek loan, skill development program and marketing policy upgradation,” she said. “The government allocated Taka 3 billion ($35 million) to the foundation. We disbursed 35% of it to women-run SMEs. The allocation, however, is not sufficient against the huge demand.”

We do not have any mandatory policy to disburse the loan through banks and we can also do MFIs (microfinance institutions) for easy access for women, she said. “We cannot force banks to give loans to women in the given structure.”

There are some issues in securing licenses and the government is working to ease those obstacles, she added.