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Monday, December 22, 2014

Sunday, December 19, 2010
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SME loan definition

Photo: STAR

I was really taken aback reading the news, "Banks cash in on SME loan definition" written by Sajjadur Rahman and published in your daily on 3rd Dec 2010. It contained so many information on SME lending in which I found huge rooms to respond. The core part of the writing was SME definition and its implications on pan banking loan portfolio size. Bangladesh Bank (BB) has defined SME in May 2008 exactly in line with the same available in the then Industrial Policy 2005.

This definition does not say anything about SME loan sizes. According to that definition, many SME loans rather became non SME loans. For application of this, many existing SME loans were upgraded from SME loan to corporate loan portfolio. As a result, disbursed fund is supposed to be reduced. Moreover, SMEs are not (and were never in the past) defined in terms of loan size/limit. Even from day one, for example, an 80 crore taka loan may fall in SME segment (or may not) depending on the characters of the borrowing enterprise. On the contrary, a loan of taka 2 crore may not even fall in SME. Even there is no regulatory loan limit set for small or medium enterprises. Regarding provisioning rate for SME loans it is exactly the same that applies to corporate loans.

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