**Issue Title: Flexible and Innovative Credit for Small and Medium Women
Entrepreneurs**

**Problem Statement**

Contribution of women in the economy is very important for the growth of
the private sector, which offers a substantial share of employment
opportunities. Mainstreaming women in industrial activities of the
private sector can substantially contribute towards economic growth and
their empowerment. In order to support women to release their creative
potentials as entrepreneurs innovative and specialized services are
needed.

Although some specialized funds/programs have been undertaken to
facilitate credit towards small businesses with more relaxed conditions
but in practice, in most of the cases, entrepreneurs are required to
offer collateral to guarantee loan repayment. Majority of the women do
not possess any assets and cannot formally offer the necessary
securities against loans. For offering tangible securities (usually
land), bank procedures force women to involve men in the transaction.
Thus, despite various incentives and rebate under industrial policy and
other development policies the disbursement of loan to the small
entrepreneurs still remains very low. In fact access to finance is
perhaps the number one problem of the SMEs of Bangladesh, as typical
banks and financial institutions ignore the money-needs of the SMEs.
These include start-up capital; fixed capital, working capital and
expansion capital.

A study on default loans suggests that the default rate was higher in
small and medium businesses than the big loans. The small firms were
also found to be suffering from inefficient management problems[^1] .
Bankers' view on this suggests that, the reasons which make it difficult
to lend to small businesses especially owned by women are[^2][^3]^,b^:

\- Heavy time commitments and higher costs for processing and monitoring
of loans.

\- Inadequate information about the enterprise. This puts in additional
risk of inadequacy in monitoring.

\- Absence of suitable flexible packages tailored to the needs of women
entrepreneurs.

The non-formal financial institutions that started to operate for
women-owned micro enterprises in early 70s were limited to BRAC,Grameen
and a handful of similar other NGOs. In 80s MIDAS started to operate
with extending its target from micro to small enterprises .In 90s BASIC
bank also started to operate. Micro enterprise development stories of
BRAC and Grameen are full of successes and have been followed as a "Good
Faith Fund" model initiatives in many developed and developing countries
[^4]. However, the experience with small and medium enterprises
including those owned by women is different. With all thrusts on the
empowerment of women and sector-based development initiatives
women-owned small enterprises have not been able to come up to a visible
land mark.

MIDAS with its successes with micro enterprises did not show the same
results with small and medium enterprises and especially those owned by
women. One study showed that the rate of lending to women owned
enterprises have declined from 27.98% to 13.4% from 1995 to 1999. Low
success in developing women entrepreneurs was also found as one of the
limitations of MIDAS credit program[^5].

BASIC bank also showed its shift towards bigger enterprises gradually
although its initial purpose was to develop the small and medium
enterprises. Thus it is now being increasingly recognized that there is
a need for more innovative approaches for increasing the supply of
credit and financing options to small business owned by women
entrepreneurs[^6].

Funding women entrepreneurs is recognized as a global challenge. Most
women still prefer to non-formal financial source rather than financial
institutions as their source of fund. Women entrepreneurs opined that
the reasons which deter their access to financial resources are[^7]:

-   Lack of appropriate skills to evaluate the business especially those
    in the informal sectors.

-   Fear of being rejected, unwillingness to have collaterals from
    partner, doubts about defending the project.

-   Lack of knowledge on different available options of financing
    scheme.

Women Entrepreneurs Association of Bangladesh (WEAB) provides
professional services to women entrepreneurs, which include trade
information, skill in business management, skill in product development
and designing and marketing opportunities. Most of WEAB members are
micro and small business owners .WEAB also wants to help them in
acquiring credit from formal financial institutions.WEAB president is
willing to take up an initiative to exchange with financial institutions
in order to bring them forward to offer innovative credit schemes for
the members of WEAB. WEAB has requested ATDP to assist it in this
venture. A preliminary survey among WEAB members has been conducted to
identify required type of project, scale of credit and term of credit.

**Solution: Policy Proposal to Make Customized Credit Packages for Women
Entrepreneurs:**

The president of WEAB is willing to take up an initiative to exchange
with financial institutions in order to bring them forward to come up
with innovative credit schemes for the members of WEAB. As agreed by
both the organizations, ATDP will assist in this initiative. A
preliminary survey among WEAB members has been done to identify type of
small businesses. WEAB has also discussed the matter preliminarily with
several financial institutions. Based on the input from the
entrepreneurs WEAB will suggest these organizations to develop
customized credit package catering to the need of its member
entrepreneurs.

A reform in the credit policy of financial institutions may thus help
these women entrepreneurs make investment decisions necessary for their
business expansion .Moreover, more entrepreneurs will follow this first
batch of women and take decision to obtain credit from banks for the
enhancement of their business success.

**Steps to Achieving Policy Changes**

-   Survey among WEAB entrepreneurs/associations will be conducted to
    understand their problems related to access to credit.

-   The specialized needs of women entrepreneurs will be identified.

-   Problems of financial institution will also be identified especially
    those regarding monitoring and evaluation of small businesses.

-   New and flexible financial package will be designed in consultation
    with the marketing personnel of the financial institution.

-   Dialogue with WEAB and financial institutions will be conducted to
    adopt the proposed new credit policy.

-   Submission of a reformed credit policy to the financial
    institution/s by WEAB.

-   New innovative and dynamic financial packages will be offered for
    entrepreneurs of WEAB from the banks and other organizations**.**

**Expected Impacts**

-   Women run enterprises will expand with the help of a flexible credit
    policy from financial institution/s.

-   Financial institutions will come up with newer ideas on dynamic and
    innovative approaches to lend money to small and medium women
    entrepreneurs.

-   More women entrepreneurs will decide to acquire loan from such
    credit scheme.![](media/image1.png){width="0.20833333333333334in"
    height="0.15625in"}

**References:**

[^1]: Huq Mohammad Ziaul;In Industrial Loan Default the case of
    Bangldesh;pp 96-97;2004

[^2]: 2a. Personal interview with executives of One Bank Ltd, Prime Bank
    Ltd, Eastern Bank Ltd. and IPDC.

    2b.Ionescu Dina; Financing Women Entrepreneurship: A Global
    Challenge;OECD Experience; Presentation In Organization for Economic
    Co-operation and Development ,

[^3]: ^a,b^

[^4]: Internet :Beyond Balance Sheets :Micro lending;
    <http://www.consciouschoice.com/2000/cc1311/microlending1311.html>

[^5]: ^?^ Islam Nazrul and Mamun Muhammad Z ;In Entrepreneurship
    Development an Operational Approach; The University Press
    Limited;2000

[^6]: ^5^ Ahmed Iftekar;Taking Stock and Charting a Path for SMEs in
    Bangladesh; Bangladesh Enterprise Institute; January 2004

[^7]: ^6^ Personal Interviews with WEAB members; Data on File