Experts at the international micro-credit conference Monday called for establishing a separate micro-credit regulatory agency to bring discipline in small financing and dynamism in this segment of financial sector.
"Establishment of a micro-credit bank in the country might be the right answer to the need for bridging the gap between the poor and the rich in their access to credit," said Muhammad Yunus, founder and managing director of the Grameen Bank (GB).
Speaking as a keynote speaker at the conference Yunus said conventional commercial banks are more interested to offer funds to the rich people, but not the poor and small borrowers, who possess immense innovative ideas.
He urged the government to establish a micro-credit bank and a genuine agricultural bank with the sole aim to make the poor and illiterate people their clients.
So, the legal provisions of these two banks will not be difficult like the ones that exist in the conventional banking system, he said at the inaugural session of the two-day international conference on micro-credit held at the Bangladesh-China Friendship Conference Centre (BCFCC).
The conference titled "Bridging the Gap between Micro and SME Finance" was organised by the South Asia Enterprise Development Facility (SEDF) and attended by the beneficiaries and experts of micro-credit from home and abroad.
The GB founder said most of the rural poor people have enormous creativity, but they cannot use their talent in making a better living due to lack of support from the traditional banking system.
In Bangladesh, the number of micro finance beneficiaries is between 15 million and 20 million, Yunus said adding that they could have graduated to the SME borrowers had they been given adequate credit support.
At the conference, the Bangladesh Bank (BB) governor, Salehuddin Ahmed, said the central bank has already recommended the government to establish a separate cell for micro-credit borrowers to facilitate proper disbursement of funds to the real entrepreneurs.
"We also need to be more effective in financing the Small and Medium Enterprises (SMEs) to alleviate poverty," Salehuddin said adding that the micro financing is a process that helps poor and illiterate people get easy access to financing.
He said the BB has already taken some steps to finance the SMEs as the Bangladesh government took this sector as the priority area in its industrial policy.
"We need to monitor whether the money goes to the real borrowers or not," Salehuddin said.
He said the use of Tk 1.0 billion equity fund which the central bank has allocated to the entrepreneurs in the agro-processing industries should be supervised.
"We should also supervise whether the borrowers of this fund are investing in the projects against which they have taken loans," he said.
Replying to queries, Yunus said the interest rates on micro credit should be like those being charged by the conventional banks and if the rates go beyond 10 per cent then it should not be called micro finance.
The micro-credit lenders go to the borrowers, but the commercial banks lack such efforts and understanding in financing at micro level," said Chief Executive Officer (CEO) of the Asian Banker Singapore, Emmanuel Daniel, who also moderated the first session of the conference.
Making a closer scrutiny of the poor people is a major success of the micro financing, he said.
Emmanuel said financing small businesses in Asian countries is very important as it has already proved success in poverty alleviation in many cases.
"Now, the microfinance is going to the industrialised developed countries where it had no existence," Emmanuel said.
Director of the SME Department of International Finance Corporation (IFC), Washington, Laurence Carter, managing director of the RaboBank India Sanjiv Bhasin, managing director, Dun and Bradstreet Ltd, Dubai, Rajesh Mirchandani, representatives of PA Consulting New York, USA and director training, PlaNet Finance, Paris, Mostaq Ahmmed spoke at the first session.