Business Finance for the Poor in Bangladesh (BFP-B) Project
Business Finance for the Poor in Bangladesh is a £25m facility to create economic opportunities for small businesses by changing the behaviour of market actors in the financial sector. They are improving the policy and regulatory environment for financial institutions, inducing private sector investment in expanding the frontiers of finance, and enhancing the credit worthiness of small businesses.
Small businesses are among the main drivers of growth for countries worldwide. In Bangladesh, small businesses employ over half of the country’s workforce and contribute to a quarter of GDP.
These 8 million small business, also known officially as cottage, micro and small enterprises (CMSEs) are the foundation of the country’s private sector.
Access to and use of formal financial services is one the major drivers of growth of small businesses in Bangladesh and the rest of the world, according to World Business Environment Survey Investment Climate Surveys.
This means credit for investments, digital payments to efficiently send and receive money for goods and services, deposit accounts and digital wallets to safely store excess liquidity, and insurance to de-risk investments.
Yet 75% of Bangladeshi small business are unserved by the formal financial sector, while the rest are under-served. Financial institutions have little incentive to serve the small business segment because capital constraints, conservative boards and regulatory environment discourage investment in a segment with high costs of risk assessment and distribution.
Many small businesses choose not to use formal services even where these are available. There is little incentive to use available services due to limited product and channel offering, and inflexible product and pricing features.
This means small businesses struggle to grow, and the wider benefits of healthy and growing small businesses to the overall economy are muted.See more