Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Authors of this Report Sanjana Singh Radhika Asrani Anupama Ramaswamy Advisory Support Ananya Wahid Kader Tarek Kamal Praveen Ravi 2 © International Finance Corporation 2016. All rights reserved. 2121 Pennsylvania Avenue, N.W. Washington, DC 20433 Internet: www.ifc.org The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. IFC encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly, and when the reproduction is for educational and non-commercial purposes, without a fee, subject to such attributions and notices as we may reasonably require. 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Additionally, “International Finance Corporation” and “IFC” are registered trademarks of IFC and are protected under international law. 3 Acknowledgement International Finance Corporation-World Bank Group’s (IFC-WBG) Finance and Markets Global Practice has produced this report with funding from Global Affairs Canada. IFC-WBG is grateful for the support given by the Canadian Mission to Bangladesh. The report was developed under the leadership of Ananya Wahid Kader. The survey and data analysis was conducted by Athena Infonomics, India Private Limited. Our thanks go to all the women SME entrepreneurs, bankers and other stakeholders who were interviewed for this report. Their willingness to share their experiences have helped the WBG to charter a course of action in improving the entrepreneurial ecosystem for women. A special note of appreciation is extended to Jennifer Barsky, who has enriched the research with her insights on global best practices and international experiences in promoting female entrepreneurship. We are grateful for the valuable guidance from Niraj Verma and Jennifer Isern. The report has been made possible through the support from other officials of IFC Bangladesh including Wendy Werner, Raja Debnath, Ehsanul Azim, Francesca Lo Re, Ishtiaque Aziz, Upoma Dutta, Shahzeen Hafiz and Takreem Riwan Siddiqui. Bangladesh Bank’s support was essential in the report’s development. The central bank’s wealth of experience in promoting access to finance for women SME entrepreneurs informed our findings, and we are grateful for their data and insights on this segment. 4 Abbreviations ANBC Adjusted Net Bank Credit BB Bangladesh Bank BBS Bangladesh Bureau of Statistics BC Business Correspondents BHWA Bangladesh Homeworkers’ Women Association BMDC Bangladesh Management Development Centre BMET Bureau of Manpower, Employment and Training BRDB Bangladesh Rural Development Board BSCIC Bangladesh Small and Cottage Industries Corporation BWCCI Bangladesh Women Chamber of Commerce & Industries CAGR Compounded Annual Growth Rate CIB Credit Information Bureau DPCB Domestic Private Commercial Banks GAP Gender Action Plan HBFC House Building Finance Corporation ICB Investment Corporation of Bangladesh MFI Micro Finance Institution MIDAS Micro Industries Development Assistance Society NAP National Action Plan for Women’s Advancement NASCIB National Association of Small & Cottage Industries of Bangladesh NBFI Non-Bank Financial Institutions NGO Non-Government Organisation PRSP Poverty Reduction Strategy Paper RBI Reserve Bank of India RJSC Registrar of Joint Stock Companies RM Relationship Manager SAPRI Structural Adjustment Participatory Review Initiative SCB State Owned Commercial Banks SHG Self Help Group 5 SME Small and Medium Enterprise WEAB Women Entrepreneurs Association of Bangladesh WEDP Women Entrepreneurship Development Program 6 Contents EXECUTIVE SUMMARY ................................................................................................................................... 11 Background and Objectives ......................................................................................................................... 11 A. WOMEN SME FINANCING GAP....................................................................................................................... 11 A1. Demand in the Women SME Sector ...................................................................................................... 12 A2. Flow of Formal Finance to the Women SME Sector .............................................................................. 12 A3. Finance Gap ........................................................................................................................................... 12 B. PROFILE OF WOMEN SME ENTREPRENEURS ...................................................................................................... 12 C. BARRIERS TO ACCESS TO FINANCE FOR WOMEN SME ENTREPRENEURS .................................................................. 13 C1. Demand Side Issues ............................................................................................................................... 13 C1.1. Debt Ecosystem Satisfaction Index ..................................................................................................... 14 C2. Supply Side Issues .................................................................................................................................. 14 D. CREATING AN ENABLING ENVIRONMENT FOR GROWTH OF FINANCE IN THE WOMEN SME SEGMENT ........................... 15 1. REVIEW OF THE ENTREPRENEURIAL ECOSYSTEM FOR WOMEN IN BANGLADESH ...................................... 16 1.1. OBJECTIVE OF THE STUDY ................................................................................................................................. 20 1.2. APPROACH AND METHODOLOGY ....................................................................................................................... 20 1.3. CAVEATS AND ASSUMPTIONS ............................................................................................................................ 22 1.4. OUTLINE OF THE REPORT .................................................................................................................................. 22 2. BUSINESS CASE FOR FINANCING WOMEN SMES ........................................................................................ 23 2.1. CHARACTERISTICS OF WOMEN SME ENTREPRENEURS ........................................................................................... 23 2.1.1. SMEs and Women Entrepreneurs ...................................................................................................... 23 2.1.2. Profile of Women SMEs ..................................................................................................................... 24 2.1.3. Financial Characteristics of Women SMEs ......................................................................................... 29 2.1.4. Women SME entrepreneurs’ Demand for Finance ............................................................................ 30 2.2. CHARACTERISTICS OF THE FINANCIAL ECOSYSTEM ................................................................................................. 32 2.2.1. Financial Institutions in Bangladesh ................................................................................................... 32 2.2.2. Financing Programmes for Women-Owned SMEs ............................................................................. 33 2.2.3. Current Flow of Finance to the SME Sector ....................................................................................... 35 2.3. FINANCING GAP FACED BY WOMEN SME ENTREPRENEURS .................................................................................... 41 3. DEMAND AND SUPPLY SIDE BARRIERS IN CREDIT ACCESS .......................................................................... 42 3.1. AWARENESS .................................................................................................................................................. 44 3.1.1. BORROWER ANALYSIS