Rapporteur Report

Plenary Session 3

 

 

1.0  Title of Discussion

 Financing and Source of Fund for Business Incubation

 

2.0  Presenter

 Dr. Muhammad Solaiman (Bangladesh)

 

3.0  Chairperson/Moderator

 Dr. Morgen Chateuka

 

4.0  Rapporteurs

 4.1 Shahrin Hj Mohd Tamit

 4.2 Siti Rozana DP Hj Mohd Yunos

 

5.0  Presentation and Discussion

 

5.1  Abstract/Overview

There is no doubt that funding is one of the crucial problems faced by SMEs. The general view given by formal sectors and financial institutions is that SMEs are risky in nature thus, SMEs would require an extensive form of security to be enable them to access the funding. The paper highlighted the experience of Bangladesh with the use of various funding schemes to assist the SMEs.

 

5.2  Main points and Issues discussed

 

5.2.1   Sources of funding: made up of internal (a built-in mechanism that is generated within the company itself (e.g. profits)) and external sources (formal sector and financial institutions).

 

5.2.2       Financing constraints such as project preparation, collateral requirements and bureaucracy and corruption.

 

5.2.3       Mechanisms and support institutions to minimize the funding constraints.

 

5.2.4       Best practices in financing SMEs have also been highlighted.

 

6.0  Suggestions and Conclusion

 

  • To look at the experiences of other countries such as Bangladesh that has shown promising outcomes in providing funding to SMEs i.e. The Job Opportunity and Business Support (JOBS) and other support institutions include the Micro Industries Lending Assistance (MELA); Grameen Bank and the Micro Industries Development Assistance and Services (MIDAS).
  • The role of the government is also imperative towards the development of SMEs in particular with the problems associated with bureaucracy and corruption.
  • Initiatives such as done by International Finance Corporation (IFC) and the World Bank can be viewed as a benchmark for the other countries which includes training courses to assist the domestic financial institutions to develop practical skills needed to identify profitable ventures/businesses.

 

7.0  Question and Answer Session

 

7.1  Q: What are the strategies developed in recovering the loans given to the SMMEs? (Nigeria)

 

A: The trend the last few years has been very promising. The recovery rate in Bangladesh is 89%, or approximately $80 million. There is a need to regularly follow up with the graduates of the incubators. Once they have paid, then they will only receive the services required.

 

7.2  Q: Elaborate further the role of the government in providing collateral for the SMMEs. (Brunei Darussalam)

 

A: Certain institutions do provide financing in the form of free collateral but it is normally for amounts that are below $100,000. There are several other alternatives to collateral, such as the shop house or the enterprise itself can be regarded as collateral.

 

7.3  Q: How small are the small enterprises? (Lesotho)

 

A: NGOs work at grass roots level and look after very poor people but not entirely as there are those that do not participate in SMEs due to specific reasons. There should be a kind of safety net programme provided such as lowering interest rates and that there is some scope in which countries can learn about providing financing to SMEs.

 

7.4  Q: How has corruption been dealt with? (Expert)

 

A: There is a high level of corruption in Bangladesh but prospects are not too bleak in Bangladesh because corruption within the private sector can be viewed or labeled as minimal. Against this backdrop, in order to promote the conducive environment for SMEs, the government has to rectify their problem related to corruption.

 

7.5  All this time much has been said what can be done with the financing problems within the NAM member groups but ideally, NAM should step ahead by looking into each member’s countries problems and contribute instead of resorting to discussions.