Digital payments to facilitate small business loans

According to experts, accepting digital payments through personal retail accounts could pave the way for local small, small and medium-sized enterprises (CMSMEs) to secure loans from formal banking channels.

In November 2020, Bangladesh Bank issued a circular allowing micro and disadvantaged businesses that have accounts with banks, mobile financial services and payment service providers to open personal retail accounts without a business license .

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“Although the sector covers 90% of the country’s economic activities and employs more than 1.4 million people, around 60% of CMSMEs do not have access to financing from banks and other financial institutions,” Shah Zia-Ul said. Haque, another central bank director.

But if CMSMEs use digital platforms for their transactions, it would leave a record or footprint that could be leveraged to secure loans from banks, he added.

Haque was speaking at a personal retail account workshop at the Westin Dhaka yesterday.

Micro businesses can open personal retail accounts with banks by meeting full KYC (Know Your Customer) requirements.

However, the monthly outstanding balance cannot exceed Tk 10 lakh in their respective account if a micro business opens it by completing an e-KYC.

The central bank has also allowed customers to open accounts by completing simplified e-KYCs, where only national identity cards need to be presented.

Initially, banks will be able to provide up to Tk 1,000 in loans to CMSMEs under the facility, which will be introduced when transactions through personal retail accounts gain popularity.

“And the central bank will provide the necessary guidelines in this regard,” Haque said.

Muhommad Badiuzzaman Dider, head of Bangladesh Bank, said if banks and other financial institutions provide loans to small vendors, they will also benefit from expanding their market.

Ms. Rashed Al Hasan, Senior Project Officer for the Financial Sector at the Asian Development Bank, Md. Khurshid Alam, Executive Director of the Central Bank, Rafeza Akhter Kanta, Additional Director, also spoke at the event.

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