...SME financing peaked to nearly Rs. 400 billion in 2008 to Rs. 319 billion in June 2010. The number of SME borrowers has come down significantly to 197,808 constituting only about 5.2% of the total number of the borrowers of the banking industry. Credit gap of Rs. 25 billion is causing various SME closures. Cumbersome procedure and delays: Even after providing collateral the loan approval takes well over 6 months. According to a survey conducted by SMEDA most of the SMEs are denied credit by rejecting their movable/immovable properties other than land as collateral. As small business owners in Pakistan are not well educated, they’re unable to meet the stringent standards of banks. Either SMEs don’t apply for bank loans at all, or if they do (10.7%) they’re more likely to be rejected (75%) as compared to large businesses due to absence of established structures. The cost of credit financing: For SMEs access to risk-sharing credit is also difficult because of high costs. The interest rate spread of banks increased from 3% during 1990’s to 8% by the turn of the new millennium. According to a study conducted by ADB, lease financing represents up to 25% of total fixed investment. The cost of funds for leasing companies averaged approximately 18% per annum which is much higher than for banking sector. The report issued by ADB also identifies the difficulties in obtaining export finance as banks require export letters of credit. SMEs being mostly indirect exporters can’t...
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...SME defined by SBP as an entity having less than 250 employees and Rs. 300 million revenues. SMEs account for a substantial part of the economy; there are about 3.2 million enterprises in Pakistan, of which about 3 million (93%) are SMEs. SMEs spread across the economy with varying density: see exhibit 1-A for the sector wise division of SME sector. According to a survey conducted by SMEDA, this sector contributes more than 30% to GDP and 25% to the country’s total export earnings, and employs close to 70% of the labor force in the manufacturing industry, services, and trade. Their share in manufacturing value addition is estimated to be around 35%. Small & medium businesses play a very critical role when economies are transiting from low to middle income levels yet Pakistan has paid less attention to the growth and development of this crucial pillar of economy. Our report mainly focuses on the financial constraint to growth of this sector. Capital requirements: According to SMEDA there’re 800,000 SMEs in Pakistan that are eligible for bank loans. Another 2.4 million potential businesses that can’t qualify for bank loans mainly rely on other sources of finance for their business needs. Approximately 89% of working capital and 75% of fixed investments are financed from retained earnings. (See exhibit 1-B) Remaining financing needs are fulfilled from external sources which include family and friends, bank loans and other small sources as depicted in exhibit 2-A. Despite the...
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...International Journal of Business and Management Tomorrow Vol. 2 No. 7 Scope and Strategies in Financing of SMEs by Banks Onkar Chand Rana, Asst. Professor, Sri Sai University, Palampur, H.P. Professor K. Ravi Sankar, IGNOU, New Delhi Abstract Scope and Strategies in Financing of Small and Medium Enterprises by Banks- a case study of State Bank of India at Pathankot, was conducted with a view to examine the problems of SMEs of Pathankot area, examine the scope of further financing SMEs by Banks in Pathankot area and devise requisite strategies for financing of SMEs by Banks in Pathankot area and thereby increase their SME loans portfolio which would help the banks and ultimately the country to achieve the projections as per Indian vision 2020- a document by the Planning Commission according to which the Industry share in GDP which is 26% at present is projected at 34% and the service sector share which is at present 46%, is projected at 60% by the year 2020. On the analysis of the secondary data, which was obtained from Banks Performa Reports, Annual Returns and Annual Credit Plans, it was observed that huge scope exists for the banks in Pathankot centre for intensive financing of SMEs which is observed from the data that at present CD Ratio at the centre is 58.71% (below the prescribed national average of minimum 60%) and the share of SMEs to total advances being 31.58%, which need to be increased to at least 50%. The primary study was conducted on the basis of random...
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...definition of Small and Medium Enterprises (SMEs). Some define them in terms of their total revenue, while others use the number of employees as an indicator. The European Union defines a medium-sized enterprise as one with a headcount of 250, a small firm as one with a headcount of less than 50 and a microenterprise as one with a maximum of 10 employees. The National Board for Small Scale Industries (NBSSI) which is the regulatory body for SMEs in Ghana defines SMEs in terms of both fixed asset and number of employees. It defines an SME as an enterprise with turnover greater than US$200,000 and not more than US$5 million equivalent (NBSSI) The SME market constitutes the vast majority of businesses in Ghana and over the years has evolved to become the key supplier and service provider to large corporations, including multinational and transnational corporations. Principally, SME’s has contributed to: Expanding output; Providing value-added activities in the manufacturing sector; Creating employment opportunities especially in the services sector; Contributing to broadening Ghana‟s export base; Increased competition; Innovation; SMEs are important to almost all economies in the world, especially to those in developing countries. They contribute to productivity and job creation; they serve as a nursery for larger firms constituting the next step for micro enterprises (Palma and Gabriel, 2005). In addition, SMEs tend to be the primary driver for job creation...
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...GUIDE FOR EXPORTING SMEs EXPORT IMPACT FOR GOOD © International Trade Centre 2009 The International Trade Centre (ITC) is the joint agency of the World Trade Organization and the United Nations. Street address: ITC, 54-56, rue de Montbrillant, 1202 Geneva, Switzerland ITC, Palais des Nations, 1211 Geneva 10, Switzerland +41-22 730 0111 +41-22 733 4439 itcreg@intracen.org http://www.intracen.org Postal address: Telephone: Fax: E-mail: Internet: HOW TO ACCESS TRADE FINANCE A GUIDE FOR EXPORTING SMEs Geneva 2009 ii ABSTRACT FOR TRADE INFORMATION SERVICES 2009 F-04.03 HOW INTERNATIONAL TRADE CENTRE (ITC) How to Access Trade Finance: A guide for exporting SMEs Geneva: ITC, 2009. x, 135 p. Guide dealing with the processes involved in obtaining finance for exporting SMEs – explains the credit process of financial institutions from pre-application to loan repayment; examines the SME sector and barriers to finance, as well as the risks in lending to the SME sector as perceived by financial institutions; addresses SMEs’ internal assessment of financial needs, determining the right financing instruments, and finding the appropriate lenders and service providers; discusses how to approach and negotiate with banks; tackles cash flow and risk management issues; includes examples of real-life business plans and loan requests; includes bibliography (p. 134). Descriptors: Trade Financing, Export Financing, Export Credit, Risk Management, SMEs, Manuals. English...
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...SME Financing in Bangladesh: Problems and Prospects SME Financing in Bangladesh: Problems and Prospects Prepared for Arafat Rahman Assistant Professor Institute of Business Administration Jahangirnagar University Prepared by Tanjila Sharmin 201301029 Md. Mourshed Uddin 201303006 Naim Ahmad 201403020 Sayeed Ishtiaque Ahmed 201403027 Md. Sazzad Hossain 201403034 Course Participant BUS 501: Managerial Communication (Section-02) WMBA Program Institute of Business Administration Jahangirnagar University December 20, 2014 Letter of authorization November 23, 2014 Course Participant BUS 501: Managerial Communication The purpose of this report is to familiarize you with the basic techniques and principles associated with writing a formal business report so that you can build and enhance this specific written communication skill. This formal report will be coordinated with a formal presentation session on the topic of the report. At a minimum, your report should include information related to the following issues: Introduction to the Industry/Sector/Area – What is the industry/sector/Area? What is the background of the industry/sector/Area in Bangladesh? Who are the major participants? You may show how the industry/sector/area is contributing to the economic development of the country. In this case, you must use industry-related data for the past three years (at least). In case of export-oriented industries...
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...Institutional Financing of SME in Bangladesh [pic] [pic] TERM PAPER ON Institutional Financing of SME in Bangladesh Submitted By: ID- Program- BBA Premier University, Chittagong Submitted in partial fulfillment of the requirements for the Bachelor of Business Administration. Submitted To: Ms. Nilufar Sultana Lecturer, Dept. of Finance & Banking, Faculty of Business Studies, Premier University, Chittagong. DATE OF SUBMISSION: /09/2012 Letter of Transmittal Date: To Ms. Nilufar Sultana Faculty of Business Studies Premier University, Chittagong Sub: Letter of Transmitter on Term Paper Dear Madam, This is my pleasure to submit my term paper report on “Institutional financing of SME in Bangladesh” which I was assigned. It was a great opportunity for me to acquire knowledge and experience in respect of the functions, procedures and operational activity, other than my topic of study. I have concentrated my best efforts to achieve the objectives of the assignment study and hope my endeavor will serve the purpose. However, I will always be ready to provide any further clarification that you may require. Sincerely Yours, ID# Program: BBA Batch Number: 16 8th Semester Section: Major:...
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...CHAPTER - 1 INTRODUCTION 1.1 INTRODUCTION TO SMEs Small and Medium Enterprises (SMEs) have played a significant role world over in the economic development of various countries. Over a period of time, it has been proved that SMEs are dynamic, innovative and most importantly, the employer of first resort to millions of people in the country. The sector is a breeding ground for entrepreneurship. The importance of SME sector is well-recognized world over owing to its significant contribution in achieving various socio-economic objectives, such as employment generation, contribution to national output and exports, fostering new entrepreneurship and to provide depth to the industrial base of the economy. Small and medium-sized enterprises (SMEs) are the backbone of all economies and are a key source of economic growth, dynamism and flexibility in advanced industrialized countries, as well as in emerging and developing economies. SMEs constitute the dominant form of business organization, accounting for over 95% and up to 99% of enterprises depending on the country. They are responsible for between 60-70% net job creations in Developing countries. Small businesses are particularly important for bringing innovative products or techniques to the market. Microsoft may be a software giant today, but it started off in typical SME fashion, as a dream developed by a young student with the help of family and friends. Only when Bill Gates and his...
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...achieving full employment and socio economic development through public investment in medium and large scale enterprises. Notwithstanding the direct involvement and the effort of the government, the sector is saddled with a lot of constraints, including scarce capital, intensive technology, foreign exchange constraints, poor management, corruption and inadequate attention to economic viability and market prospects which has resulted in poor performance of the industries in terms of output and employment (Steel & Webster, 1992). Following an economic recession in the 1980’s which resulted in the retrenchment of workers from the civil service, the rationalization of production in the private sector under the Economic Recovery Programme (ERP) was launched in 1983, and the high population growth rate of 2.6% per annum, coupled with the inability of the medium and large scale enterprises to grow and expand over time to absorb the idle labour, the SMEs has become an important option and alternative source of employment. SMEs have been...
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...also called small and medium enterprises (SMEs) or small and medium-sized businesses (SMBs) are businesses whose personnel numbers fall below certain limits. These are the most common businesses found across most of the world’s economies. The World Bank Review on Small Business Activities establishes the commitment of the World Bank Group to the development of the small and medium enterprise (SME) sector as a core element in its strategy to foster economic growth, employment and poverty alleviation. In the context of Bangladesh, the development of Small and Medium Enterprises (SMEs) can be considered as a vital instrument for poverty alleviation and ensure the rapid industrialization. So we can say that the role of Small and Medium Enterprises (SMEs) is indispensable for overall economic development of a country particularly for developing countries like Bangladesh. It has drawn a lot of interest among policy makers, academics, businessmen and people in general. Government of Bangladesh has highlighted the importance of SME in the Industrial Policy-2005. SMEs have been identified by the Ministry of Industries as a ‘thrust sector’. As the SME sector is labor intensive, it can create more employment opportunities. For this reason government of Bangladesh has recognized SME as a poverty alleviation tool. As a result they will enhance the standard of living in rural areas. SMEs (Around the world) : Although the definition of what an SME is varies across nations, the most widely used...
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...Enterprises (SMEs) play a pivotal role in poverty alleviation and rapid industrialization of the developing countries like Bangladesh. In this paper we tried to appraise the Problems and Prospects of SMEs in Bangladesh. We observed from the research that non availability of adequate credit, complex loan granting procedure, inadequate infrastructure facilities, problems of collateral requirements, paucity of working capital, non availability of skilled work force, poor salary structure, lack of coordination among SME related organizations, lack of appropriate marketing strategies etc. are the major hindrances to the development of the SMEs in Bangladesh. In order to overcome the problems researchers have tried to provide some recommendations for the developments of SMEs in Bangladesh based on sound reasoning. Background of the Assignment Small and Medium Enterprises (SMEs) act as a vital player for the economic growth, poverty alleviation and rapid industrialization of the developing countries like Bangladesh. SMEs are significant in underlying country’s economic growth, employment generation and accelerated industrialization. Government of Bangladesh has highlighted the importance of SME in the Industrial Policy-2005. SMEs have been identified by the Ministry of Industries as a ‘Thrust sector’. As the SME sector is labor intensive, it can create more employment opportunities. For this reason government of Bangladesh has recognized SME as a poverty alleviation tool. SMEs also foster...
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...Introduction The Small and Medium scale Enterprise (SME) are recognized worldwide as engines of economic growth. The commonly perceived merits often emphasized for their promotion especially in the developing countries like Bangladesh include their relatively high labor intensity, dependence on indigenous skills and technology, contributions to entrepreneurship development and innovativeness and growth of industrial linkages. The case for fostering SME growth in Bangladesh is irrefutable as these industries offer bright prospects for creating large-scale employment and income earning opportunities at relatively low cost for the unemployed especially in the rural areas strengthening the efforts towards achieving high and sustained economic growth which are critically important prerequisites for triggering an exit from endemic poverty and socio-economic deprivation. These promotional arguments for the SMEs, while universally emphasized are often put forward by their ardent advocates in a small versus large context and thus arouse serious debates concerning their economic viability. Much of such controversies may, however breakdown if the intrinsic virtues specific to SMEs and unavailable to large-scale industries are correctly identified and carefully exploited. A combined interaction of the forces of product-mix, location factors, technological advantages and market advantages create opportunities for SMEs to grow and prosper at all levels of development which are often ignored...
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...state that could be highly developed industrially. This paper reviews the state of industrial development in the state, comparing it with other states in the country. Previous forecasts and studies were also reviewed, while some cases of existing small and medium scale enterprises (SMEs) within the state capital, Akure, were also investigated with results presented in order to establish the peculiar problems militating against their profitability and level of profitability. These problems were found to be availability of credit facility, infrastructures and bad or poor management. Keywords: Credit facility, forecast, infrastructure, management, profitability. Introduction The definition of small and medium enterprises (SMEs) varies from country to country, region to region and from agencies to agencies in today’s world. Loveman and Sengenberger (1990) recounted that, “Small enterprises” or “small and medium enterprises” are elusive concepts. They do in fact hide a large heterogeneity in the types of the firms. The Nigerian concepts of SMEs are somewhat divergent but the Central Bank of Nigeria agrees with the Small and Medium Industries and Equity Investment Scheme (SMIEIS) in their definition of a SME as any enterprise with a maximum asset base less than N200 million (equivalent of about $1.43 million) excluding land and working capital, and with the number of staff employed not less than 10 (otherwise...
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...SUMMARY Overall, the SME FDI is currently an extremely valuable initiative. Through appropriate and careful analysis of the data, public policy can be directed yet more efficiently to further improve competitive advantage of Canada's SMEs. In particular, the baseline survey associated with the SME FDI is an extraordinarily valuable research undertaking. It provides the potential to assess directly the extent to which financing gaps might occur in the capital markets on which SMEs rely. This is an important issue in practical terms, in terms of the role of public policy, and in terms of economic and finance theory. The SME FDI baseline survey data provides, for the first time internationally, a means of empirically testing Nobel prize-winning ideas related to information asymmetry and capital rationing. The data provides a means of providing yet better guidance for public policy with respect to addressing potential capital market imperfections that might constrain growth and economic development of SMEs. As designed, the research initiative can and will provide valuable information about these issues. In summary, the baseline survey undertaken as part of the SME FDI is a potentially invaluable resource with respect to the design, targeting, implementation, and follow-up assessment of public policy approaches to nurturing SME growth and viability. The outcomes of this research process could help Industry Canada and its partners to provide Canadian SMEs with substantial competitive...
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...OVERVIEW Small and medium enterprises (SMEs) occupy unique position in most of the countries especially in a developing country. They are a primary target for many countries desiring to stimulate economic growth and development. The SMEs sub-sector plays an increasingly dominant role in the technology assimilation and dissemination and in economic development in Bangladesh as well. In Bangladesh, SMEs playing a significant role for the development of our economy by creating employment opportunity and producing important alternative machines and machinery parts for saving huge foreign currency for our country. So as a part of our development strategy, we should intensify our efforts to develop this sector to grow industrial base and volume of foreign trade. As we know the in this age of globalization, it is impossible to stop the flow of foreign goods to any country. Only quality products can meet the challenges in global market. For meeting this situation SMEs need to upgrade their technological capabilities and production facilities in order to produce quality products at a competitive price. DEFINITION Small and medium enterprises or small and medium-sized enterprises (also: Small and Medium-sized Enterprises; acronym in the plural: SMEs; small and medium businesses or small and medium-sized businesses, acronym: SMBs; and variations thereof) are companies whose headcount or turnover falls below certain limits. Enterprises Fixed Capital Investment Employees Small ≤Tk...
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