Up to 63% of SME loans disbursed in the first nine months of the year went to the commercial sector, thus neglecting the manufacturing area.
In the first nine months of the year, 77,718 crore loans to SMEs were disbursed in the commerce sector, up 20.28% year on year.
"This is not a good indication that lion shares of SME loans have been disbursed in the trade sector," said Salehuddin Ahmed, former governor of Bangladesh Bank.
The manufacturing sector accounted for 24.02% of total SME loans disbursed during the period and the service sector 12.81%.
Between January and September, banks and non-bank financial institutions managed to disburse 92% of their SME target for the year. The target was Tk 133,853 crore.
"The central bank should investigate whether the disbursed loans have actually been paid to the SME sector," Ahmed said.
Banks could have shown other loans disbursed in the form of loans to SMEs, since customers are allowed to withdraw about 10 million crowns from banks in the name of investment in small and medium-sized enterprises.
"Banks prefer the trade sector because it is relatively less risky than the manufacturing sector."
The former BB governor went on to urge banks to increase their loan disbursements to the manufacturing sector, as the creation of jobs will give a boost if the sector enjoys a credit sufficient.
The economy will not benefit if the majority of loans go to the trading sector, said AB Mirza Azizul Islam, a former financial adviser.
Banks have recently made the disbursement of SME loans important in order to avoid defaulting loans, said Shafiqul Alam, managing director of Jamuna Bank.
He acknowledged, however, that banks are sometimes reluctant to disburse loans to the manufacturing sector because they have large capital expenditures.