Women entrepreneurship is growing in Bangladesh. But the gender gap in credit access persists

Only 6 percent of the women entrepreneurs are getting bank loans for their startups, according to a report

While the number of women entrepreneurs in Bangladesh has risen, they continue to face challenges in securing loans in the small and medium enterprises sector.

To meet Bangladesh Bank's loan disbursement goals for women, the volume of loans granted to women entrepreneurs needs to double by the end of 2024. Achieving this target appears to be a tall order, despite the increasing presence of women in the entrepreneurial landscape.

Many women entrepreneurs say they are forced to resort to third-party lenders who impose higher interest rates, as banks impose unrealistic conditions for loan eligibility.

Entrepreneur Hasina Akhter runs her own jute business called Nuri's Jute Craft in Jashore. But no one was willing to give her a loan when she began working on her startup two decades ago, she said.

"To start my business, I had to get a loan from a third party at a high interest rate."

Now serving as the assistant secretary for the Jashore Stitch Mahila Udyog Samiti, a body recognised by the Department of Women Affairs to advocate for women entrepreneurs' rights, Hasina is committed to easing the investment process for newcomers.

"Today, I'm working to ensure that new entrepreneurs are able to avail of investment facilities since I had to struggle a lot initially after starting my business," she said.

Arifa Nazneen, another entrepreneur, highlighted the stringent prerequisites set by banks for small business loans, such as the requirement for government guarantors. She suggests that allowing elder brothers or husbands as guarantors could increase loan accessibility for women.

"Banks require us to have government guarantors to get approval for small business loans. I think more women will be able to access these loans if their elder brothers or husbands allowed as guarantors."

According to Arifa, banks are reluctant to provide loans under Tk 500,000 for any small businesses run by women.

"Banks ask us to show an inventory worth two or three times the loan's value. This is why women refrain from seeking such loans," she added.

Nabanita Saha, another entrepreneur, claims that women have a better track record of repaying loans compared to men.

"However, banks are still apprehensive about funding women-run businesses," she said.

WHY THE DISPARITY?

While specific data on the number of women entrepreneurs in Bangladesh is not available, the Small and Medium Enterprises Foundation estimates the figure to be over 500,000.

Despite the budding number of women-run businesses, the proportion of loans distributed to them remains relatively low.

According to Masudur Rahman, chairman of SME Foundation, the number of women entrepreneurs has increased significantly since 2010.

"In 2020, the number was over 13.8 percent. But less than 6 percent of these women have been able to secure bank loans in Bangladesh," said Masudur.

He claimed that men receive the vast majority, about 93 percent, of startup loans from banks, pointing to a stark gender disparity within the banking sector.

Following a report published by the Bangladesh Bank's SME and Special Programs Department, women entrepreneurs were able to avail of loans worth Tk 44.73 billion from 2010 to 2020. These loans were disbursed at a special interest rate of 4 percent.

The central bank has set a target of allocating at least 15 percent of SME loans to women entrepreneurs by the end of 2024. Meeting this target necessitates doubling the volume of loans awarded to women.

This year, the theme for International Women's Day is 'Invest in Women: Accelerate Progress'.

Although the Ministry of Women and Children Affairs has taken steps to promote women's employment and access to loans in Bangladesh, significant progress is still a ways off.

The 2022-2023 annual report details 18 projects and 21 programmes aimed at supporting women-led businesses, with a budget of Tk 44.04 million allocated across 492 Upazilas and 4,570 Unions in Bangladesh.

During that period, approximately 9,160 women received small loans to kickstart their businesses.

WHO IS INVESTING IN WOMEN ENTREPRENEURS?

Bangladesh Bank has instructed all public and private institutions to extend loan facilities to women entrepreneurs.

Several financial institutions, including IPDC, Lankabangla Finance, and IDLC Finance, alongside banks such as banks Standard Chartered Bangladesh, The City Bank, Mutual Trust Bank, Eastern Bank, and BRAC Bank, have set up special programmes to support women entrepreneurs with loans.

According to Oxfam Bangladesh Program Quality Officer Bangladesh Basanti Sannyasi, women have been getting more involved in running startups since the outbreak of COVID-19.

Basanti Sannyasi, programme quality officer at Oxfam Bangladesh, pointed to a marked increase in women's involvement in startups since the COVID-19 pandemic began.

“Both small and medium-sized businesses need investments. Development agencies should also increase their investment in women entrepreneurs. Only then will it be possible to implement the theme of this year’s Women’s Day,” she added.

[Writing in English by Ruhshabah Tabassum Huda; editing by Turaj Ahmad]