In a move to fuel entrepreneurship and generate employment, Bangladesh Bank has set a goal for banks and NBFIs to ensure that over a quarter of their total loans go to CMSMEs by 2029.
This is a clear view that MSMEs face a major financial gap in their businesses. But the question is, will this 27% allocation be enough to smooth the business journey of MSMEs across the country? Because every year, 70,000 MSMEs walk into the retail businesses. Whereas, they contributed 38.91% value addition and 24.45% to GDP in the 2022-2023 fiscal year.
But how can they get access to the allocated amount, as there are numerous hurdles to accessing the official loans. Let’s see the most common challenges the MSMEs undergo in collecting loans.
Challenges of Formal Loans:
Today, we will highlight the key challenges a retailer faces. As the retailers are often not so educated, it is often tough for them to go for the formal loan sanctioning. And the most hazardous part is that it is a very lengthy process. A retailer actually does not have the time to close the shop any day and run for the loans, which are uncertain as to whether they might get them or not.
- Detailed documentation
- Collateral requirements
- Miscommunication
- Lack of transparency in loan terms and conditions
- Disparate systems and lack of integration
- Ineffective risk management
- Non-performing loans
- Data overload
- Lack of automation
- Hidden fees and charges
Let’s shed some light on the unknown issues like miscommunication and ineffective risk management.
NGL, banks often do not communicate clearly about the loan status, requirements, or changes in certain rules and regulations or laws. This gives rise a confusion in the minds of retailers, and they also do not have a proper questionnaire in their minds to clear the air in their minds. And that leads to frustration, and they become uninterested in going to the bank in the future. So, no good brief regarding loan sanctioning—losing the opportunity to empower the retailer.
Secondly, ineffective risk management exposes lenders to financial losses and reputational damage. The banks are still under the process of risk management powers. Lack of risk assessment methodologies and leveraging data analytics and modeling techniques is leading to risks both for banks and retailers.
PriyoShop, the embedded loan redecorator:
Slowly and surely, Bangladesh’s MSME sector is experiencing financial shifts, with PriyoShop leading the charge through advanced embedded lending solutions. As traditional banking struggles to serve small retailers effectively, PriyoShop’s innovative credit facilities are bridging the gap with remarkable results.
According to industry insights, embedded lending platforms like PriyoShop deliver new-fashioned outcomes: MSMEs receive funding decisions 80% faster, operational costs drop by 30-50%, and risk assessment becomes significantly more accurate. They have already introduced two types of credit facilities: the CMSME Credit Card partnered with Lanka Bangla PLC and a while ago, the Digital Loan partnered with BRAC Bank PLC. Before these two innovative solutions, they had an informal loan process installed in the PriyoShop App, through which retailers could take credit facilities and restock their shops.
Here is how PriyoShop’s credit ecosystem is empowering Bangladesh’s small businesses:
Streamlined Operations for MSMEs: PriyoShop’s end-to-end lending platform eliminates the fragmented, manual processes that traditionally plague small business financing. From instant loan applications within the app to automated credit assessments and rapid disbursements, MSME owners can access working capital without leaving their shops, keeping their businesses running smoothly.
Boosted MSME Profitability: By accelerating credit approval processes, PriyoShop enables MSMEs to seize market opportunities quickly. Smart AI-driven risk assessment through partnerships like BRAC Bank helps identify creditworthy retailers who were previously overlooked by traditional banking, expanding financial inclusion while maintaining low default rates.
Customized Financial Solutions: Understanding that each corner shop has unique needs, PriyoShop personalizes credit offerings based on individual business patterns, transaction history, and market dynamics. This targeted approach ensures MSMEs receive appropriate funding amounts and repayment terms that align with their cash flow cycles.
Real-Time Business Intelligence: PriyoShop’s platform provides MSME owners with comprehensive dashboards showing their credit utilization, repayment schedules, and business performance metrics. This transparency helps small retailers make informed decisions about inventory management and expansion opportunities.
Enhanced Financial Security: Through secure computing systems and robust risk management, PriyoShop protects both MSMEs and lenders from fraudulent activities. Built-in compliance features ensure all transactions meet regulatory requirements while maintaining the speed and convenience small businesses need.
Last but not the least
As MSMEs are the backbone of societies everywhere, they contribute to local and national economies and to sustaining livelihoods. In particular, among the working poor, women, youth and groups in vulnerable situations.
Policymakers must move beyond recovery and consider ways to lower and eliminate barriers faced by MSMEs while improving the business environment and access to finance, markets and technology in these fragile times.
Moreover, PriyoShop’s embedded lending revolution is transforming how Bangladesh’s thousands of MSMEs access and utilize credit, turning financial constraints into growth opportunities and building a more inclusive economy for small retailers nationwide.