Implement SME stimulus fully to help them survive

The government should implement the current stimulus packages for the cottage, micro, small and medium enterprises (CMSMEs) and announce another round of support in the upcoming budget to help them survive, said experts and entrepreneurs.

Besides, CMSME entrepreneurs, who have been battered by the fallouts of the coronavirus pandemic, called for a reduction in value-added tax (VAT), and preparing an accurate database on the sector to facilitate banking services.

So far, 73 per cent of the Tk 23,000 crore fund meant for CMSMEs has been disbursed even though the disbursement in other categories is already nearing completion.

The lending is comparatively low as a majority of them could not meet the stringent conditions to secure loans from lenders.

In addition, the perennial issue of a lack of a proper definition for CMSMEs acts as a barrier in availing of funds from the stimulus packages announced in April last year.

The entrepreneurs have been left devastated by the Covid-19 fallout, which wiped out more than 15 per cent of these businesses due to inadequate sales volumes.

This left thousands of workers without a job, while another 50 per cent of the CMSMEs are struggling to survive.

For example, Md Mokarram Hossain, managing director of Super Fit, a small-scale leather shoemaker based in Hemayetpur, Savar was forced to whittle down the number of workers from 12 to three in order to sustain his business amid the pandemic.

His sales volume has declined from Tk 20 lakh per month in the pre-pandemic era to just Tk 50,000 per month now.

Bank officials had visited his factory several times to find out whether Hossain qualifies for the loans. Still, he was unable to secure any funds due to the stringent conditions and low sales volume.

"Now, I will have to leave entrepreneurship, and I am looking for a job," said Hossain, who started the company back in 2008, when he was still a student at the intermediate level.

"The government should expand the stimulus fund and ensure proper implementation so that we can survive."

Masuda Yesmin Urmy, proprietor of Hazaribagh-based Smart Leather Products, was a bit luckier. She received Tk 20 lakh from the stimulus fund.

But since it was disbursed in several stages, she was unable to use it properly. Even she had to use some of it to repay the loan.

With her sales having been slashed by half, Urmy now operates her business online.

Rubina Akter Munni, owner of Design by Rubina, fell in trouble after having to spend around Tk 50,000 per month to continue her business with very low revenue.

"The government should give special attention to small enterprises as they create job opportunities," she said.

Sheikh Saadi, owner of Agro Machinery Industries, echoed the same.

"The next budget should focus on rescuing CMSMEs from the Covid-19 fallout. Rehabilitating the sector should get maximum priority," said Rizwan Rahman, president of the Dhaka Chamber of Commerce and Industry.

It could be through providing low-cost collateral-free funds and technical support to diversify businesses into new potential arenas. The government may even ease the burden of VAT and advance income tax, he added.

Rahman said it was found that 66 per cent of the CMSMEs did not even apply for the package at all. Among those that did apply, just 45 per cent have received loans so far.

The next round of stimulus for the sector should not be fully bank dependent, Rahman said.

The DCCI chief suggested that the SME Foundation, the Bangladesh Small and Cottage Industries Corporation, and other channels be used to disburse the stimulus funds properly.

Ferdaus Ara Begum, chief executive officer of the Business Initiative Leading Development (BUILD), called for a second stimulus for CMSMEs and preparing a proper database.

Nearly one crore CMSMEs in Bangladesh are not registered under a proper database. As a result, they are unable to enjoy various government benefits, she said.

As of May 6, some 92,800 CMSMEs received loans amounting to Tk 14,598 crore from the Tk 20,000 crore stimulus fund for the sector.

The BUILD CEO also demanded a reduction in the VAT rate and an extension of the disbursement period.

The SME Foundation has received Tk 300 crore from the government so far. The state-run agency plans to disburse Tk 100 crore by the end of June through nine banks and non-bank financial institutions, said Md Masudur Rahman, chairman of the SME Foundation.

The foundation aims to disburse Tk 1 lakh to Tk 75 lakh among new entrepreneurs at a low-interest rate.

Md Ali Zaman, president of the SME Owners Association of Bangladesh, urged the government to draw up policies to prevent larger industrial units from occupying the markets of CMSMEs.

Currently, a lot of industrial conglomerates produce goods that CMSMEs also make.

Due to this unhealthy competition, thousands of CMSME units in Lalbagh, Badda, Dhania and old Dhaka were wound up, Zaman said.

In its budget proposal, the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) has suggested the government arrange collateral-free loans for CMSMEs, said FBCCI President Md Jashim Uddin.

The apex trade body also praised the central bank for introducing a credit guarantee scheme for CMSMEs.