Access to Low Cost, Formal Financial Service


Access to and use of formal financial services is one of the major drivers of growth of small businesses in Bangladesh and the rest of the world, according to World Business Environment Survey & Investment Climate Survey.

Study reveals that most of the SMEs lack technical supports and are not covered by the formal financial sector because of several reasons. They are mostly capital constraints, conservative boards members of commercial banks and regulatory environment discourage investment considering high costs and risks. However very recently, a handful number of commercial banks have begun opening SME Centers/ sub branches, and agent outlets to bring small entrepreneurs as well as farmers under the banking umbrella with much less cost than informal sources of financing.

It is also found that SMEs and farmers choose not to use formal services even where these are available. There is little incentive to use available services due to weak marketing channels  and limited products. As a result, SMEs and startup acquire loans mainly from informal sources (NGOs, relatives, friends, neighbor, etc.).