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Stimulus for SMEs

Slow progress in fund disbursement

Siddique Islam | August 13, 2020 00:00:00

Banks and non-bank lenders could disburse only Tk 15 billion of the stimulus package until July 30 for smaller firms.

The disbursed amount is just 7.50 per cent of total Tk 200 billion financial support meant for small and medium enterprises (SMEs). The support is to help the SMEs weather the adverse impact of the Covid-19 pandemic.

Loans amounting to Tk 27.50 billion were sanctioned to more than 8000 SMEs during the period, according to central bank's statistics.

Bangladesh Bank governor Fazle Kabir is scheduled to meet with top executives of 36 banks in the next week for expediting the implementation of the government-announced stimulus packages, said officials.

On July 02, the BB governor met top bosses of 23 banks for the purpose.

Senior bankers, however, said that some strict conditions, imposed by the BB on the policy as well as higher operational costs than those of large industrial and service sector loans are mainly responsible for the slower disbursement of such loans.

Under the existing policy, the banks and non-banking financial institutions (NBFIs) can lend manufacturing and services 50 per cent and 30 per cent respectively while the remaining 20 per cent for trading purposes.

They were not sure about the implementation of the financial stimulus package by the end of this month as per the central bank's instructions.

But they are hopeful about increasing the disbursement of such loans after the full operations of the BB-announced Credit Guarantee Scheme (CGS) for cottage, micro and small enterprises.

Syed Mahbubur Rahman, former chairman of the Association of Bankers, Bangladesh (ABB), urged the central bank to implement the CGS immediately for expediting implementation of the package for the CMSME.

The central bank has already announced the CGS worth Tk 20 billion aiming to expedite financing for the CMS enterprises.

Mr. Rahman, also MD and CEO of Mutual Trust Bank Limited, said he is monitoring the implementation of the package on a daily basis.

"We've asked our officials to sit with interested customers and identify good borrowers to expedite the disbursement of such loans," the senior banker said.

Abu Reza Mohd. Yeahia, deputy managing director of Islami Bank Bangladesh Limited (IBBL), said all zonal heads have already been advised to send applications for seeking loans under the package for CMSME as early as possible to the headquarters for taking necessary measures.

IBBL has already received around 1000 applications for seeking loans under the package, he added.

"We're trying to complete disbursement of such loan by the end of this month," the DMD said.

"We're facing a problem in sanctioning such loans because of the sector-wise ceiling, set by the central bank, in its policy," Syed Abdul Momen, BRAC Bank's SME Banking head, told the FE.

He also said most of the clients in the sector are traders but the central bank fixed only 20 per cent of lending for the trading purpose.

Rejecting the bankers' allegations, a BB senior official said the central bank has included such conditions in line with the government's desires.

"The government wants to create employment opportunities across the country by boosting manufacturing activities with the implementation of the package," the central banker noted.

He also said the banks may avail the low-cost central bank's refinancing facility to implement the package.

The BB has already formed a Tk100 billion revolving refinancing scheme to help banks and NBFIs for the implementation of the package for the CMSMEs.

In April, the central bank issued a guideline for providing working capital facilities amounting to Tk 200 billion in line with the government's announcement for the CMSME sector affected by the coronavirus pandemic.

Apart from cottage and micro firms, only SMEs have created employment for 7.8 million people directly and provided livelihood for 31.2 million in Bangladesh.

The sector also contributes 25 per cent to gross domestic product, according to the 2016 Household Income and Expenditure Survey.

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