Working Capital Financing for MSMES: A Case Study on the Offerings of BRAC Microfinance

Author:S. Jobayear Ahmed*

Abstract:
The Micro, Small and Medium Enterprises (MSMEs) play a pivotal role in the socio-economic development of Bangladesh by covering about 99% of the total indusial sector in the country. In spite of the growth opportunity offered by the MSMEs the growth opportunities of the enterprises are usually stagnated due to the absence of proper financing opportunities particularly in the formal system. Particularly, the MSMEs suffer most to arrange the working capital from the financial institutions. In light with that financing opportunities BRAC (Bangladesh Rural Advancement Committee) NGO the largest in the world offers various collateral free loan facilities for the development of the MSMEs. The objectives of the study are to: Understand the current offerings of the BRAC Microfinance products and comparative advantages of using the BRAC Micro Finance Products, Identify the factors affecting the loan approval and Understand the risk and reward factors associated with the Products. The study is explorative in nature and is primarily based on the qualitative and quantitative data collected from secondary literature. Qualitative data was derived from various books, journals, business reports from renowned organizations like: World Bank, Bangladesh Bank and BRAC studied. The quantitative data used throughout the report were either sourced from: BRAC Annual Reports, BRAC Website (www.brac.net) and received from the Microfinance Product Development Team. The quantitative data was tabulated, analyzed, graphed and reported using MS excel and the guidelines of standard report writing was followed strictly. Besides the qualitative data was used for supporting the claims of the quantitative data. The study found that the interventions are profitable but risky. Particularly during the COVID pandemic when the loan recovery rate has lowered RAC should be cautious to handle the risky ventures and devise the protective instruments accordingly that will offer a win-win situation.

Keywords:Key Words: MSME, Loan, Interest, Borrower, Microfinance.

DOI:10.46333/ijtc/11/1/1

International Journal of Trade & Commerce (Vol: 11 Issue:1)