Exploring the role of Private Commercial Banks (PCBs) in increasing SMEs' financial accessibility in developing countries : a study in Bangladesh

Poor collateral is the fundamental barrier in accessing to PCBs' (Private Commercial banks) for SMEs (Small and Medium Enterprises). In recent years, relationship-lending provision emerged where previous liability payment history, record keeping and other business transactions are the conditions. In relationship lending system, the soft information is importantly considered, which is collected through a long time relations between a branch level loan officers and applicant firms. However, the information opaque firms who have been declined or never applied for bank loan due to the expectations of decline (discouraged firm) do not have previous liability payment history, have poor record keeping habit and no long-time relationship with a particular bank. They have only a level of soft information. Only, the soft information could be the element of first accessing SMEs to gain initial bank finance to create a relationship lending for the particular group of SME. There is no solution for the group of SMEs. Considering the importance of the group of SMEs, there is an emerging attitude of both the micro-and macro-economic sector to enhance the initial financial accessibility of the group of SMEs; however, that is not well defined and effective. Hence, a one-size-fits all solution is needed. For that, a model should be developed in win-win basis for a one size-fits-all solution. Therefore the aim of this study is to find a model to use and assess the This study considers formal SME financing in Bangladesh by focusing on SMEs applying for their first loan. The data collection method is discourse semi-structured interview with guide for undertaking discourse analysis method. The interviewing was conducted with branch managers and higher officials of PCBs, owner-Managers of SMEs, higher officials of Bangladesh central Bank (BB), SME Foundation, Bangladesh Small and Cottage Industries Corporation (BSCIC) and Micro-Industries Development Assistance and Services (MIDAS). This study redefined collateral assets as Materialistic Collateral Assets (MCA) refers to collateral and Cognitive Collateral Assets (CCA). Soft information has been defined as CCA, which could be only element that can be used as an alternative of the collateral assets. This study proposed a model of interactions titled as TTF (Tour To Finance) by which the CCA could be improved, assessed and used for the first accessing SMEs' owner-managers. The CCA and the TTF can provide strategic building up for both the macro and micro-economic perspective. The findings and proposition could be effective in those of countries where branch level loan officers are empowered in field level assessment and financing decision making. This study recommends developing a matrix for CCA measurement through conducting a further Action research by using grounded theory.