A whole portfolio designed for CMSMEs

Kamrul Mehedi, DMD & Head of Small, Microfinance and Agent Banking

The Daily Star (TDS): How do you assess the current state of the MSME sector in Bangladesh?

Kamrul Mehedi (KM): When I look at the MSME sector – our Cottage, Micro, Small, and Medium Enterprises – I see the real engine of Bangladesh's economy. They are literally the backbone.

We see our role as much more than just lending money. We are about being true enablers of growth. That means bridging the financing gaps, reaching out to those who have been traditionally underserved – especially in rural areas – and even helping them build their business skills. Ultimately, a strong MSME sector is crucial for Bangladesh to hit its development goals, and we are committed partners in making that happen.

TDS: How is your bank addressing the challenges faced by MSMEs?

KM: We have developed specialised loan products with much simpler documentation and more flexible collateral requirements, especially for those in micro and cottage industries. We have shifted towards cash flow lending, looking more at a business's potential earnings rather than just hard collateral. Currently, 97% of our lending to cottage, micro, and small enterprises is unsecured and collateral-free. We also work closely with partner organisations like Bangladesh Bank, SME Foundation, and Joyeeta Foundation to reach out to promising entrepreneurs in clusters.

TDS: Does your bank have any dedicated products, financial literacy programmes, or credit guarantee schemes targeted at MSMEs?

KM: We have a whole portfolio of products designed specifically for CMSMEs. For example, we offer various working capital and fixed asset finance solutions, carefully crafted to meet their diverse needs. We also encourage them to build financial habits with specific deposit schemes targeted towards enterprises and individuals. We have innovative offerings like Remittance Beneficiary Loans, Distributor and Supply Chain Finance, Shariah-compliant Islamic Investment products, etc.

Beyond products, financial literacy is huge for us. We regularly run workshops and training, often collaborating with the SME Foundation, renowned universities, etc., covering everything from basic accounting to digital banking.

We are active participants in the refinance, pre-finance, and credit guarantee schemes offered by Bangladesh Bank.

TDS: How has your bank leveraged technology to improve outreach and services to MSMEs?

KM: Our agent banking network has been phenomenal – it brings banking services right to their doorstep in remote locations. Our Citytouch is one of the best digital banking solutions, where entrepreneurs can complete transactions and avail facilities without ever needing to visit branches.

We have also integrated with the popular Mobile Financial Services (MFS) platform bKash and are pioneering the country's largest Digital Nano Loan programme. We are moving towards more digital loan applications to cut down on paperwork and speed up approvals.

We are also exploring data analytics and credit scoring, particularly for those micro and cottage businesses without extensive financial records.

TDS: What steps is your institution taking to support women-led MSMEs?

KM: We are committed to Bangladesh Bank's directive of dedicating at least 15% of our CMSME portfolio to women entrepreneurs. In fact, we outperform that number significantly, as 19% of our CMS portfolio constitutes women enterprises. We actively participate in their refinance facilities, which offer lower interest rates specifically for women-led businesses, with additional incentives for timely repayment.

We run specialised training programmes for women entrepreneurs focusing on business management, marketing, and digital skills to build their confidence and capabilities. Our City Alo Certification Programme is a flagship programme that has been running for quite some time now.

TDS: What policy reforms or partnerships are needed to sustain Bangladesh's MSME growth?

KM: For sustainable MSME growth, ongoing, robust collaboration between banks, the government, and other key players is vital.

I would certainly recommend strengthening and expanding the credit guarantee mechanisms. Making them easier to access and perhaps increasing the guarantee coverage – especially for those high-potential but high-risk micro and cottage businesses – would greatly boost banks' confidence in lending.

A strong national drive for formalisation and digitalisation of MSMEs is also essential. Also, developing more sector-specific policies and focusing on MSME clusters would unlock immense potential.

Finally, continued regulatory support from Bangladesh Bank for innovative lending models – like cash flow-based lending and movable asset financing, building on the Secured Transactions Act – is key.