Govt needs to do more for SMEs, domestic industries

There is no question that the export-oriented sectors, particularly garment, have been dealt a cruel blow by the global coronavirus pandemic. Which is why, Prime Minister Sheikh Hasina on March 25 have rolled out a Tk 5,000 crore stimulus package for them.

But there is a vast swathe of domestic industries and small- and medium-sized enterprises that has been hit, arguably, just as hard. But they remain criminally neglected thus far.

An assistance of sorts was offered to them on March 19, when the Bangladesh Bank (BB) asked banks not to consider borrowers as defaulters if they fail to repay instalments until June 30 this year.

But, their accounts will still continue accrue interest during the period, so this begs the question: could this move from BB be of genuine help to them?

When economic activities have been close to standstill for a good one month now and with no signs of things getting back to normal in the near future, is it rational to assume that they would be able to service the loan accounts complete with the accrued interest in two months' time?

Banks are unable to waive the interest payment for entrepreneurs as they now face a wide range of financial problems of their own due to the ongoing crisis, said Syed Mahbubur Rahman, managing director of Mutual Trust Bank.

"But, it is undeniable that the SMEs will have to be protected from the economic fallout in the interest of the country's GDP growth."

One way the government can help them in this dark hour by offering to pay their interest amount, said Rahman, also an immediate past chairman of the Association of Bankers, Bangladesh a forum of managing directors of banks.

"It must only be the regular, upright borrowers who are given this relief -- the habitual defaulters must be left out of this facility, come what may," he added.

Salehuddin Ahmed, a former governor of the central bank, recommended outsourcing the task of separating the good borrowers and entrepreneurs from the bad ones to banks.

"The government should address the issue promptly, or else a large number of local manufacturers will be forced to wrap up their businesses," he added.

Banks do not have any strength to waive the interest as they have to provide interest to depositors as well, said Ahsan H Mansur, executive director of the Policy Research Institute.

The lenders are now burdened with the financial packages declared by the government.

For instance, lenders will not be allowed to realise any instalment from borrowers until June but that has put pressure on their funds.

Besides, the central bank asked mobile financial services not to impose any charge on deposits amounting to Tk 1,000 per day, as a result of which the vendors are losing money.

"The government should be providing funds to banks and MFS vendors. The other countries have also followed the model," said Mansur, also the chairman of Brac Bank.

The authority concern has yet to take any genuine rescue measures: the buck has been passed on to the banks and the MFS players.

"And regrettably, the government has not taken any measure to shield the small entrepreneurs, when they are the one of the driving forces of the economy."

The SMEs generate employment and keeps the economic growth rolling in, said Mansur, also a former official of the International Monetary Fund.

Rahman, Mansur and Ahmed went on to urge the central bank to form a special refinance schemes for the SME sector such that they can get loans at a discounted rate than the existing market rate for a soft landing to this drop in economic activities.

As of September last year, banks and non-bank financial institutions gave out Tk 205,491 crore to SMEs, which is about 20 per cent of their total outstanding loans, according to data from the central bank.