Problems in funding SMEs in Bangladesh: An empirical study on Chittagong metropolitan area

Abstract

Problems in funding SMEs are a common phenomenon of academicians, experts and government. Though, SMEs are furnishing to the economy in development but they are originated most helpless to the micro and macro-economic crises. Consequently, they fall into funding problems. The study has used both financial and statistical tools for evaluating the data gathered for the research. The study has recognized various probable problems of SMEs in obtaining funds from banks and financial institutions such as asset based collateral and high cost structure of fund, unavailability of fund without guarantee, sources of capital constraints, and poor credit management. On the contrary, prospective entrepreneurs are also not that eager in raising capital from banks due to some procedural hazards like complex application procedure, high collateral, high interest rates, more time consuming which make the need of obtaining bank loans ineffective. This study identified some major hindrances that both the SMEs and banks face in obtaining and granting loan, respectively. Finally, findings offered some proposals to develop the situation in Bangladesh.