SME Loan Defaults in Bangladesh
SMEs are vital for growth and jobs in Bangladesh, accounting for 40 per cent of all employment. In comparison with large enterprises and micro enterprises, SMEs have traditionally been underserved in terms of access to credit. However, more recently collateral-free loans through bank lending have become available to SMEs with the central bank’s growing focus on SME financing. Although official statistics suggest that the SME loan default rate is about two per cent, it is acknowledged that overall SME loan default figures in Bangladesh may have reached five or six per cent. This study uses survey data gathered from 96 SME loan recipients, now in default, to explore the factors contributing to high SME default rates.