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Global Alliance for Banking on Values (GABV) founding member, BRAC Bank, has released a groundbreaking study to measure the impact of its lending to small and medium-sized enterprises (SMEs) in Bangladesh. The work will contribute to the development of a new approach to measuring the impact of values-based banks globally, work that’s being developed by the GABV network.
SME finance results in robust business growth, improved socio-economic outcomes for borrowers and their families, and increases environmental awareness and practice among entrepreneurs, according to a new study from Bangladesh’s largest SME bank.
The Impact Measurement Study on SME borrowers, conducted by the University of Dhaka’s Centre for Corporate Governance and Finance Studies, assessed the impact of lending on BRAC Bank’s SME borrowers.
The study shows that repeat borrowers benefit more than first time borrowers in terms of turnover, assets and sales growth. Many saw their profits and returns on assets increase, leading to significant improvements in income and savings, and encouraging the reinvestment of profits in the business. The study also revealed that, on average, borrowers who accessed credit on four occasions were likely to be financially independent and no longer require credit.
BRAC Bank credit also had a major impact on the entrepreneurs’ environmental awareness and practice. 87% of enterprises receiving SME loans met common environmental standards.
Speaking at the launch of the results, Mr. Syed Mahbubur Rahman, Managing Director and CEO of BRAC Bank Limited, said, “In line with our philosophy of People, Planet and Profit, we, at BRAC Bank, focus on meeting the financial needs of small entrepreneurs at a grassroots level, who miss out in the traditional banking system.
“The sustainable impact revealed in the study will encourage banks to expand SME finance and entrepreneurs to take on appropriate SME loans to help improve outcomes for people and society. Already the SME Financing Model of BRAC Bank is being replicated globally through the GABV network”.
The study, which was commissioned by the GABV, a growing network of 25 of the world’s leading sustainable banks from Asia, Africa, Australia, Latin America, North America and Europe, was presented at its annual conference in Berlin in March.