Implement comprehensive credit guarantee schemes

Kamrul Mehedi, Senior Executive Vice President, Head of Small & Microfinance, City Bank

City Bank has a robust framework for supporting CMSMEs, offering a variety of financial products and services tailored to meet the unique needs of small and micro enterprises. The bank's CMSME portfolio constitutes around 22% of its total portfolio, amounting to BDT 8450.84 crore at the end of 2023. Small and micro businesses alone contributed approximately 9.75% (3856.53 crore BDT) to this portfolio. We maintain a low non-performing loan (NPL) ratio of 1.17% in this sector, demonstrating the effectiveness of our credit management strategies.

City Bank has implemented several measures to ensure that CMSMEs in rural and hard-to-reach areas have access to its financial services. The bank operates over 500 agent banking outlets in suburban and rural areas, focusing on traditionally underbanked segments. Through our Citytouch platform, we provide digital banking solutions that reduce dependency on physical branches, making it easier for SMEs to access banking services remotely. We have established 34 dedicated SME unit offices and deployed more than 1000 business staff, including field officers and credit analysts, to support CMSMEs at the grassroots level. Our distribution network covers more than 85% of the country.

We have reduced our dependency on manual hard copy documentation and are implementing internal digitisation measures to simplify loan processes, including loan origination systems and alternative credit scoring models, making them more accessible to SMEs.

We provide continuous training and consultancy services to bank staff and entrepreneurs alike to enhance the financial literacy and business management skills of SME owners. Under our City Alo – Women Enterprise Wing, we have conducted numerous batches of training and certification programmes to enhance the business skills of these budding entrepreneurs.

The bank is enhancing its digital offerings through initiatives like the Digital Agri Loan, which provides automated financial services to rural agricultural businesses. We aim to collaborate more with development partners and fintech companies to expand our reach and improve the ecosystem for SME financing. For instance, City Bank has partnered with Syngenta Foundation to offer quick loans to farmers using digital credit scoring.

The government could implement comprehensive and continuous credit guarantee schemes to reduce the risks associated with SME lending, making it more attractive for banks to extend credit to this sector. Enacting supportive regulatory policies that encourage banks to lend to SMEs, such as tax incentives and reduced regulatory burdens for SME financing, is crucial. The central bank could also evaluate reintroducing infrastructural and policy support to help banks establish more dedicated SME service centres and unit offices, easing access for clients seeking SME banking services at their convenience.

Increasing the number and reach of financial literacy programmes is essential to ensure that more SMEs understand and can effectively utilise financial services. Strengthening programmes like City Alo, which provide certification and training to women entrepreneurs, fosters gender-inclusive growth in the SME sector. Continuously developing and offering new financial products that address the specific needs and challenges of SMEs, such as unsecured loans, digital Nano loans, and supply chain financing solutions, is also crucial.