Financing Small and Medium Enterprises: A Study with Microlevel Data Analysis in Bangladesh

The objective of the study is to analyze the problem of SMEs loan management at Jamuna bank, Asulia branch. Some hypotheses have been set in the research to test the efficacy of the problems of SMEs financing. The data for the study were collected both from primary and secondary sources. The study tested three hypotheses for the study. The problems that are associated with SME loan management are not preparing proper financial statement which creates problem for the bank, judging financial standings, profitability and credibility. SMEs are not maintaining proper licensing which makes SMEs difficult to trace, create problem for the bank maintaining records, and decreases SMEs credibility to the bankers. JBL considers promotion for the product like Over Draft, Time Loan, and Term Loan to be adequate in SMEs sector. Banks can trace SMEs better, can lower their cost of capital, and can give efficient service if they grant loan cluster wise. As the SMEs in Bangladesh are habituated to operating in a semi-formal manner and banks are probably one of the most formalized institutions in our country, a big gap has opened up. The first step for Jamuna Bank Limited would be to minimize this gap by relaxing bank procedures. The bank should develop an official credit-rating system in easier way, even if in a limited manner, as soon as possible so that they can have some idea about the reliability of their SME clients. The objectives of the study are fulfilled despite some limitations. The problems are identified in this paper through detailed analysis of collected data. On the other hand the problems that JBL faced in designing proper financial products for SMEs are also identified. At the end, this study has tried to offer some suggestions to overcome those problems. If the problems can be solved the transaction between SMEs and Jamuna Bank Limited will be increased.