A Consultation Dialogue was held in BUILD Conference Room recently on Financing Schemes for Maximising Export Competitiveness in Bangladesh.
The dialogue discussed a policy paper prepared by BUILD to be presented in its 7th Financial Sector Development Working Committee meeting to be held in the end of November, 2018.
Economists and experts placed their opinions and suggestions on the available funding schemes for maximizing export diversification and competitiveness.
CEO BUILD Ferdaus Ara Begum welcomed the guests.
Mr. Md. Kamran Hasnain, Research Associate, BUILD gave a presentation on the topic. The policy paper highlighted importance of export diversification, sectoral issues for export competitiveness, experiences of different credit lines/financing schemes in the country such as; Export Development Fund, Green Transformation Fund, Long Term Fund, packing credit and other related funds, financing options & credit lines etc. being used at the pre and post export stages. It is seen that current financing facilities are very much inclined to RMG while other sectors are discriminated, limited funding applicable for some sector, availing multiple funding for a single project etc. it is necessary to introduce attractive and innovative financing options for other sectors as well.
Ms. Shahriar Rawshon gave a presentation on ‘Collateral Free Loan for Women Entrepreneurs’ where government initiative for allowing collateral, available schemes for women entrepreneurs and the financial scenario of CMSME (WE) loan disbursement issues and policies in that context.
Dr. Mahmood Osman Imam, Professor, Deparment of Finance of DU highlighted the need for subordinated bonds other than bank-based credit facilities as a form of financing. He imitated on the high requirements of Basel III and urged banks to be ready to face innovative schemes which will enter into the market with in coming five years. To make the transparency and effective monitoring of present export funds, he suggested full automation of the processing from the time of application to the disbursement citing example of EDF.
As per the conditionalities of EDF for leather and leather goods, ceramics along with last year export performance, a certain projected growth can also be considered for allowing funds to the firms to create the scope of diversified export basket should be applicable for all allowed sectors for EDF. He added that NPL is high and even SMEs now are not exception. He added that the refinancing schemes can be dealt by NBFIs in the country considering high interest rate prevailing in the market it may not be affordable for Banks. He also highlighted IDLC’s collateral free loan as an example of refinancing scheme and informed some women entrepreneurs have been successful from taking the collateral free loan, for them the amount can be even doubled to BDT 5.0 million, but in that respect policies of the banks may need to be changed. He highlighted the importance of cash flow based financing and put emphasis on the introducing market based interest rate.
Another expert added that the issue of Back to Back L/C and UPAS L/C as required in the pre-export stage and is being used largely in economic zone are important to consider for discussing the financing schemes for exporters in the country. He also said that DA (Documents against Acceptance) is more relevant in the present international trade rather to purchase DP (Documents against payment). He highlighted the importance of Negotiation of Documents under L/C as post shipment finance. He also said that packing credit loses its attraction because of high interest rate in the market. In regard to comments on SME financing, he added that the concept and application of cluster financing is not clear in the country, and suggested for introduction of export credit guarantee scheme.
Mr. Md. Joynal Abdin, ED, DBI highlighted the available loans for women entrepreneurs of SMEs at subsidized rate from SME Foundation and in regard to meet additional funding demand for successful collateral financing recipient, policies of the banks and FI needs to change.
Joydeb Saha, Joint Director, Bangladesh Bank also spoke.
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