Simplify regulatory compliance for CMSMEs

Emranul Huq, Managing Director & CEO, Dhaka Bank

Sustainable growth in the CMSME and Emerging Business industry is a major priority for Dhaka Bank. The bank is dedicated to increasing its presence in this sector. To achieve this, the bank has emphasised: i) Developing new MSME & Emerging Business products to meet the ever-changing dynamics of customer demand; ii) Developing Supply Chain and Distributor Finance models to facilitate business growth; iii) Allocating branches with specific MSME business targets and meticulously following up on them; iv) Arranging various engagement programs for people, such as fairs, workshops, and skill development training; and v) Modernising the business operations in line with the latest developments in the overall business environment.

Cluster financing has been another area the bank has focused on. Through Cluster Financing, we have reached 156 rural and suburban customers working in Shoe, Furniture, Basket, Mritt Shilpo, and Kutir Shilpo clusters. The total loan disbursement is Tk. 37.63 million.

We aim to reach CMSMEs in rural and hard-to-reach areas through mobile banking, mobile app and internet banking. We are also expanding our business network into rural and remote areas by establishing branches and sub-branches.

Firstly, I believe banks can change their perspective towards financing businesses, viewing it not merely as an earning mechanism but also as a development mechanism. If the banking system supports MSMEs, it will subsequently contribute to the country's development. To achieve this, banks should offer tailored financial products to meet customer demand instead of traditional offerings. This could include: i) Offering loans with flexible terms and conditions; ii) Providing micro-loans to small businesses and startups that may not qualify for traditional loans; iii) Introducing revenue-based financing with a flexible repayment schedule, and so forth.

In line with the motto of Digital Bangladesh, modern services such as online banking platforms and digital payment solutions can be extended to MSMEs.

As part of MSME financing strategies, banks should consider arranging financial literacy programmes to train small-business owners nationwide, conducting workshops and seminars on financial literacy, business management, and regulatory compliance.

Dhaka Bank has prioritised the MSME sector and is in the process of introducing multiple products and services under various pre/refinancing schemes to meet the timely needs of this business segment and thereby promote overall economic activity in the country.

Having a presence in all business segments, we believe that financing MSMEs should be handled under a separate mode distinct from traditional corporate financing. It is high time that simplified regulatory compliance for CMSMEs is introduced to reduce administrative burdens and associated costs. Developing policies that encourage innovation and growth in the CMSME sector, such as tax incentives and grants, should also be considered.

To secure financial support from banks and NBFIs, MSME entrepreneurs need education and training to maximize their benefits from these institutions. The government can play a vital role by promoting entrepreneurship education programmes.

To ensure a healthy and cohesive business ecosystem in the country, a collaborative environment must be established where CMSMEs, large corporations, financial institutions, and government agencies can work together to support each other's growth and development.