Policy is there but yet to bear fruit for women entrepreneurs

The National Industrial Policy seems to have failed to achieve the goal of developing women entrepreneurship as the share of the loans to female entrepreneurs has declined since the policy was enacted five years ago in 2016, widening the gap from the target.

The share of the loans to women entrepreneurs declined to 3.4% in September last year from 3.77% in 2016 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.

Total loans to women entrepreneurs stood at Tk3,533 crore in September last year, according to Bangladesh Bank data.

In line with the national policy, the Bangladesh Bank had issued a circular, instructing banks and non-bank institutions to finance at least one new female entrepreneur every year from every branch.

According to the circular, every bank branch would find at least three fresh women entrepreneurs who did not take out loans from banks or financial institutions previously and select one from them for final lending.

Moreover, banks would have to set up a dedicated desk to support women entrepreneurs in every branch.

Those instructions are not being followed by banks and non-bank financial institutions, which is reflected in the data as the share of the loan to women entrepreneurs declined instead of surging.

The Bangladesh Bank has a dedicated desk for following up the development of women entrepreneurs, which was set up by former governor Atiur Rahman but that department also seems inactive.

When contacted, a senior executive of the Bangladesh Bank said banks are unwilling to lend women entrepreneurs due to a lack of collateral.

Moreover, repayment behaviour is not so satisfactory, he said referring to banks' opinions.

However, the data shows a different picture.

For instance, the Bangladesh Bank, in a circular, instructed banks to provide a loan up to Tk25 lakh without collateral under a refinancing scheme. But in reality, many women entrepreneurs are rarely given loans even up to 5 lakh without collateral, according to the industry insiders.

In the case of repayment, female entrepreneurs are ahead of their male counterparts. For example, IDLC, a non-bank financial institution, has above 2% of default SME loans, but female entrepreneurs account for only 1%.  

A survey conducted by the Bangladesh Institute of Bank Management (BIBM) found that many women in Bangladesh, especially in rural areas, are not getting bank loans even though the recovery rate is satisfactory.

The survey paper titled "Financial literacy and managerial capacity of women entrepreneurs in small firms, and access to formal sources of finance" revealed in 2019 found that 40.70% of enterprises received loans from banks while 59.30% did not.

On average, 71.03% of women entrepreneurs got the loans they applied for.

Bangladesh stands at the bottom of the pile when it comes to making room for women entrepreneurs, according to a report MasterCard Index of Women Entrepreneurs 2020 released recently.

The country has been recognised as the toughest place for women entrepreneurs as it now ranks dead last among 58 economies by losing one notch from last year's ranking in the report.

Bangladesh along with Algeria and Egypt made lower scores between 30 and 40, while the major economies – 34 out of a total of 58 – have healthy scores of 60 to 70. Only two South Asian countries – Bangladesh and India – have got a place in the MasterCard's index this year.

India jumped three notches up from last year's position and ranked 49th in 2020. New Zealand and Australia have been placed in the top ten from the Asia Pacific, securing 4th and 9th respectively.

When contacted, Fahmida Khatun, executive director at Centre for Policy Dialogue (CPD), told The Business Standard that the MasterCard report painted the real picture of women entrepreneurship.

Women entrepreneurs are not able to move forward in Bangladesh due to a lack of access to finance, absence of proper marketing facilities of their products and social problems, she opined.

In another index of the World Bank's Women, Business and the Law 2021, Bangladesh ranked second from the bottom in South Asia and was only ahead of war-torn Afghanistan again compared to the last index.