92% women part of informal sector: Report

Women are contributing equally like their male counterparts to the country's development, but their work is not much recognised as 92% of them belong to the informal sector, according to a report by‍ Aspire to Innovate (a2i) Programme.

Some 60% of women are engaged in the agriculture sector, 17% in the industrial sector, and 23% in the service sector, said the report titled "Assessing the current ecosystem of financial products for women in Bangladesh".

The Aspire to Innovate (a2i) Programme in collaboration with LightCastle Partners presented the report at a programme in a city hotel on Monday.

As the majority of the female labour force is part of the informal sector, access to finance through formal institutions becomes difficult for them due to a lack of documents, the report said.

Women entrepreneurs are getting only 4% of the loans disbursed by banks and non-bank financial institutions to small and medium enterprises, according to Bangladesh Bank data.

At the end of December last year, the share of women in the total SME loans stood less than 4%.

Dr Selim Raihan, an economics professor of University of Dhaka, said, "We have to understand the feedback loop of financing women. For that, we need to look at proper data. And, the data we need is not available at the moment. Even if we do, the data is old. A nationwide picture of women's financial landscape should be looked at by a nationwide survey done by BBS."

The share of SME loans remained below 4% since 2010 when the national policy had set the target to improve it to 15% by 2024 as part of Bangladesh's transformation journey to become a developing country by that year.

Abul Bashar, executive director of the Bangladesh Bank, said every woman who is bankable should come under the umbrella of financial inclusion and the central bank is working tirelessly for it.

 For this, an awareness campaign is a must, he also said.

 "We have policies in the right places, but in many cases, women themselves do not know of them and hence, cannot avail," he added.

The report said small-scale female entrepreneurs (typically ineligible for formal financing) tend to avoid formal institutions due to a lack of adequate business documentation, while medium-scale female entrepreneurs do the same due to lengthy loan processing times, despite usually being qualified for these loans.

Small-scale female entrepreneurs instead seek financing from alternative sources, such as microfinance institutes and associations due to greater accessibility. 

Around half of all loan applications dropped by female entrepreneurs are rejected due to improper business financials and/or lack of trade licences, the report said.

Additionally, rural beneficiaries do not prefer travelling to agent banking points and would rather take loans from or save with microfinance institutes since payments are collected from their residence.

"Banks and NBFIs cannot afford door-to-door service delivery in rural areas like microfinance institutes due to the interest rate cap and high operating costs. RMG workers, however, have greater adoption of financial products owing to MFS-based digitisation of their wages and optional integration of MFS wallets with savings accounts," the report also said.

Most banks offer loan products at 9%, while Brac Bank, Bangladesh Krishi Bank, the City Bank, NRB Commercial Bank and Dhaka Bank offer loan products to women at an interest rate between 7-9%, the report noted. 

These banks either have dedicated wings for female banking or have revised the lending rate based on the mandated 9% cap set by the Bangladesh Bank.

Earlier, when interest rate was free, most banks had an interest rate benefit for female entrepreneurs. 

However, after the new cap of 9%, most of the banks have not revised the interest cap. Similarly, most of the NBFIs offer loan products at 10% interest rate while institutions like LankaBangla and IPDC offer at a special lower rate of 7%.

Around 11 banks and 3 NBFIs have set the limit of collateral free loans lower than the mandated 25 lacs set by the Bangladesh Bank. The list includes Islamic banks and state-owned banks that are providing collateral free women entrepreneur loans up to Tk5 lakh and Tk10 lakh, respectively, according to the report.

NBFIs with higher risk profiles offer collateral free women entrepreneur loans up to Tk15 lakh. 

In terms of deposit products, banks offer a range of 1% to 8.5% interest on their products while NBFIS offers around 6%-7%. In general, higher rates (up to 0.5% higher) are provided for female-based savings products compared to general ones, the report said. 

Dr Selim Raihan noted, "The 6%-9% cap is not acceptable at all. If we want to lend to women, the cap would not help. It effectively contributes to credit rationing. For diversification of our income earning demography, we need proper data from the supply and demand side covering the internal dynamics of lending and spending rather than looking at top level data only." 

Sonia Kabir Bashir, founder of SBK Tech Ventures and SBK foundation and Md Arfan Ali, former president and managing director of Bank Asia were also present at the event.