SME loans elude new women entrepreneurs

For new women entrepreneurs, it is still hard to secure bank loans to establish a business even though the Small and Medium Enterprise Foundation (SMEF) has been giving loans to female entrepreneurs at single-digit interest rates through banks since 2009.

Women entrepreneurs say the formalities relating to obtaining loans are too complex to fulfill for those who plan on starting up.

To get SMEF loans, an entrepreneur must have a two-year-old valid trade licence, a bank statement of the previous one year and annual sales figures for the preceding three years. These requirements are in addition to 19 other preconditions.

"If I had that much money to open a new business and run it for two years in a commercial place, then I am already an entrepreneur. Actually, there are no organisations or banks that provide loans for new entrepreneurs. That is the reality," said Umme Shaila Rumki, a young entrepreneur who founded the Physical Therapy and Rehabilitation Centre in the capital's Uttara.

"I also took Tk7.5 lakh in SME (Small and Medium Enterprise) loan from Midas Financing Limited at nine percent interest rate in 2016. It surely helped me a lot but I was not a new entrepreneur at the time. I have a service-oriented business and have been offering the service at home since 2009," she said.

Rumki said it was really hard for small entrepreneurs to rent offices in a commercial place because of the high costs involved.

Having a trade licence means the entrepreneur already has a place for business and asking for sales figures indicates that banks are offering loans only to entrepreneurs who are already established, not for those who are just starting out, she pointed out.

"Actually, a new entrepreneur has to go a long way without anyone's help. Only then are banks convinced that the business has potential and hence loans can be provided," Rumki said.

She believes SME loans can help women entrepreneurs expand their business.

Meanwhile, SMEF sources have said about Tk92 crore was given in loans to 1,850 small and medium entrepreneurs in the last 11 years. Of them, only about 28 percent are women entrepreneurs. These 514 women were given Tk16.13 crore in SME loans.

Airin Akhter, an entrepreneur who owns The Real Fashion in Mirpur and who borrowed Tk3 lakh in SME loan from Midas Financing Limited in March this year, echoed Rumki's view.

She said, "I had been trying since last year and it took me seven to eight months to finally get the loan. The loan requirements are too high. I have been doing business since 2013 but that was the first time I took a loan from a financial institution. I think it is kind of impossible for a new entrepreneur to get SME loans."

A government announcement has made it mandatory for banks to have SME help desks, but a visit to some banks revealed that such desks are doing no more than providing lists of requirements an entrepreneur needs to fulfill in order to get loans.

Mutual Trust Bank offers SME loans and has two different schemes for women. MTB-Gunoboti offers loans at nine percent interest rate. MTB-Bhaggoboti offers loans at both nine percent and 10 percent.

Requesting anonymity, a high official of Mutual Trust Bank told The Business Standard, "To be honest, that is the best the help desks can do. Many people do not know the papers they need to have to get SME loans. The help desks provide this information for them."

He agreed that the requirements were really too much for a new entrepreneur and acknowledged that only a small number of people finally get the loans. "Only one out of 10 succeeds," he added.

An SMEF official, who did not want to be named, said, "We provide training in how to start a business but not everybody eventually becomes a business owner. Banks and financial institutions give loans only to those who prove their potential or have already started a business on their own initiatives.

"A trade licence is a must to prove that one has a business. That is why banks or financial institutions demand that licence from anyone seeking a loan."

He also said entrepreneurs seeking loans are nothing but products to the banks.

"At the end of the day, we need to understand that banks are doing business. They only give loans to those who can prove that their ventures will succeed."

The first loan is the challenge

Speaking to The Business Standard, several entrepreneurs said that it was easier to take additional loans if someone succeeds in taking a loan for the first time.

Hasina Mukta undertook training in fashion designing and how to do business from the Department of Youth Development and SMEF after her husband died in 2009. Then she started manufacturing handicrafts and fashionable clothes at home with four workers.   

After a few years, she felt the need to expand the business as she was getting a lot of orders. All she needed was a bigger place and also a big investment, but she did not have that much money. 

She then took a loan from SMEF at nine percent interest without any collateral, and expanded her boutique and handicraft business in 2015.

Mukta now owns Natunatta, a boutique and handicraft store at Gopibagh in the capital, and employs 18 workers. She has an underground factory, where she makes her products, located one floor beneath her shop. 

Being a woman could not deter her from establishing a successful business.

"The SME loan I took from Mutual Trust Bank at nine percent interest rate helped me a lot in my journey towards becoming an entrepreneur," Mukta told The Business Standard.

She added, "In 2015, I took Tk6 lakh in loan, and Tk8 lakh the following year. I have repaid almost the whole amount. Moreover, I am planning to apply for additional loans for a big investment."