The trading sub-sector gets more than 51 per cent of the loans and advances disbursed by the banks and financial institutions to the small and medium enterprises (SMEs) sector, according to official figures.
On the other hand, the manufacturing and services sub-sectors get lower shares of the institutional financing, affecting employment generation, officials said.
According to figures available with the Bangladesh Bank (BB), different banks and non-bank financial institutions (NBFIs) disbursed about Tk 1.56 trillion in loans to the SMEs sector in the fiscal year (FY) 2017-18.
Over 51.47 per cent of that amount went to the trading sub-sector alone while the manufacturing sub-sector received 31.39 per cent.
The trading sub-sector got over 64.16 per cent of the total SME credit disbursed in the FY 2016-17.
According to the BB data, women entrepreneurs got only Tk 52.65 billion of institutional loans in the last FY.
The banks and NBFIs are found to be more interested in finance trading units instead of manufacturing ones. They find the latter as risky borrowers, bankers said.
"We prefer to finance trading than manufacturing and services sub-sectors under the SME financing due to the secured nature of investment," a senior executive of a private commercial bank told the FE.
Besides, he said, the scope of providing loans to entrepreneurs of manufacturing and services sub-sectors is also limited.
Usually, the trade financing always dominates the overall SME credit portfolio in the country, sources said.
An official of the SME and Special Programmes Department of BB said the banks and NBFIs are still maintaining a very high level of lending to the trading sub-sector.
But some measures taken by the central bank have changed the situation by now, he said, adding that the BB as now attaching priority to small enterprises than the medium ones.
The central bank figures, however, showed that the volume of overall SME financing continued to rise over the years.
Meanwhile, an official said, the central bank is now emphasising on extending credits to the manufacturing and services sectors under its SMEs refinancing scheme through banks and NBFIs.
Considering the situation, the BB issued a circular in June last year asking the banks and NBFIs to bring down the annual lending target for the trading sector to 35 per cent by 2021.
At the same time, the central bank also advised the banks and NBFIs to increase the disbursements of loans to manufacturing and service sectors to 40 per cent and 25 per cent respectively.
When asked, Distinguished Fellow of private think tank CPD Professor Mustafizur Rahman said that usually, the trading sector gets the loan easily because the lenders consider financing the sector more secured than that of the manufacturing ones.
So, the higher volume of lending to the trading sector is not a problem, but there should be some measures to ensure easy access of productive SMEs to such finance, he said.
"It is necessary to develop some sort of instruments so that the new scale-up and start-up SME entrepreneurs, especially the ones in ICT sector having lack of adequate collateral support to avail of formal loans, can come under the SMEs financing scheme," said the economist.
When contacted, BB General Manager (SME and Special Programmes Department) Shaikh Md. Salim said manufacturing and services sectors usually create more employment than the trading sector. "That's why we're giving utmost priority to manufacturing and services sub-sectors as far as disbursement of loan is concerned."
Another BB official, requesting anonymity, said that higher loan disbursements to the trading sub-sector usually puts negative impact on the country's overall economy as it deters industrial sector's growth as well as restrict employment generation.
