Formal financing hurdles constrain business growth

Many local businesses face substantial difficulties in availing loans from formal financial institutions, which limits their growth, according to an index.

The findings from the Municipality Competitiveness Index (MCI), particularly of its fifth pillar (economic potential and sectors), also revealed that most businesses rely heavily on personal savings and have limited access to diversified financial instruments, creating a financing gap that significantly constrains growth and expansion.

Policy Exchange Bangladesh, in collaboration with the PRABRIDDHI project of Swisscontact, presented the findings at a high-level roundtable titled “Unlocking Business Opportunities and Access to Finance: Insights from the Municipal Competitiveness Index (MCI)” on Tuesday.

The event, held at The Westin Dhaka, brought together senior officials from government agencies, banks, non-bank financial institutions (NBFIs), development partners, and municipal business representatives to address one of the most pressing challenges facing local enterprises – limited access to finance.

The MCI is Bangladesh’s first business environment index designed specifically for municipalities, reflecting the needs and perceptions of the private sector.

Speakers also stressed the need for streamlined loan processes, digitised training, improved licensing systems, and targeted support for women entrepreneurs, alongside evidence-based municipal reforms to unlock local economic potential.

Speaking at the roundtable, Dr M Masrur Reaz, chairman and CEO of Policy Exchange Bangladesh, and Md Ziaur Rahman, senior policy analyst at the organisation, gave a presentation highlighting the MCI’s evidence-based insights and their implications for local-level reform agendas.

Nahin Ferdous, senior manager at the Local Economic Development (LED) project at Swisscontact Bangladesh, gave a presentation on local economic development in municipalities, offering perspectives on how municipalities can strengthen their economic base through improved financial access and targeted interventions.

The event commenced with welcome remarks from Markus Ehmann, team leader of the LED project.

The guests of honour were Helal Hussain, country director of Swisscontact Bangladesh, and Jibon Krishna Saha Roy, director general at Bangladesh Investment Development Authority (BIDA).

Syed Abdul Momen, additional managing director and head of SME banking at BRAC Bank, said many small and medium entrepreneurs lack the basic understanding of how to get a loan, the documents required, and the steps involved in securing bank financing.

He also added that entrepreneurs often need to visit 10-15 offices to collect documents required for loan applications, creating unnecessary delays and burdens.

Tahmina Parvin, an entrepreneur from Bogura, noted that fragmented licensing, lack of local training (especially for women), unrealistic loan terms, and skill gaps pose major challenges to female entrepreneurs in the hospitality sector, underscoring the need for digitised training and streamlined services.

Jibon Krishna of BIDA emphasised that the MCI is a vital data-driven tool for the access to finance programme as it covers seven municipalities and provides insights into their advantages, challenges, and opportunities.

He stressed the need for concrete recommendations and policy reforms to address the existing gaps and enhance local economic potential.

Helal Hussain of Swisscontact Bangladesh noted that the MCI is a well-recognised global practice, previously implemented in countries like Honduras, and has been introduced in Bangladesh to support private sector growth.

He highlighted that the MCI serves as a valuable data-driven policy tool to address constraints in developing sectors while also providing a deeper understanding of local business environments.

PRABRIDDHI is an LED initiative funded by the governments of Bangladesh and Switzerland, co-implemented by Swisscontact and the Local Government Division (LGD).

The project aims to strengthen the enabling environment for businesses, foster economic competitiveness, and enhance municipal service delivery through evidence-based reforms.

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