Businesses are experiencing an uneven recovery from the pandemic-induced slowdown as larger firms are bouncing back strongly thanks to the easy access to the stimulus packages while the smaller ones are still mired in the crisis.
The large industrial and service sectors have made as much as 80-90 per cent recovery compared to the pre-pandemic level. It is only 30-40 per cent for small and medium enterprises.
Since March, the government has unveiled 21 stimulus packages involving more than Tk 120,000 crore, which is about 4.5 per cent of the GDP of Bangladesh and one of the largest in the world.
Businesses belonging to the large industrial and service sectors have managed loans smoothly, whereas small enterprises have been largely deprived.
The unbalanced recovery means the strong is now getting stronger, said economists, adding that the country is now experiencing a "K-shaped recovery" from the financial meltdown.
A K-shaped recovery occurs when, following a recession, different parts of the economy recover at different rates, times, or magnitudes. This is in contrast to an even, uniform recovery across sectors, industries, or groups of people.
For instance, Bilquis Begum, an entrepreneur involved in weaving cloths at Kamalganj in Moulvibazar, said the businesses in the region are hardly aware of the stimulus package of Tk 20,000 crore dedicated to the cottage, micro, small and medium enterprise (CMSME) sector.
Around 9,000 entrepreneurs are doing business at Kamalganj and more than 4,000 weave cloths.
This is one of the largest CMSME clusters in Bangladesh where people from the plain land and the indigenous Monipuri tribe have been producing clothes and handicrafts for decades.
"The entrepreneurs have been hit hard by the economic hardship," said Begum, also the president of the Muslim Monipuri Women Weaver Association in Kamalganj.
The entrepreneurs have so far seen a recovery of about 30 per cent.
The association has 44 entrepreneurs as its members, and some of them had secured loans ranging from Tk 50,000 to Tk 100,000 from banks before the pandemic, she said.
Smita Chowdhury, another entrepreneur in Kamalganj who produces toys from jute for export markets, said she had been forced to squeeze her business drastically.
Some 50 workers used to work for Smita before the pandemic and the number has dwindled to 15.
The central bank initiated the stimulus package in April. Forty-six per cent of the fund was given out as of December 17.
Tapan Sengupta, deputy managing director of Bangladesh Steel Re-Rolling Mills (BSRM), said his company had recovered 80-85 per cent of the business compared to the pre-pandemic level.
"We hope for a full recovery within the next five to six months if the economy does not face any major setback," he said.
BSRM, one of the largest steel manufacturers in the country, has borrowed from the stimulus fund.
As much as 92 per cent of the Tk 33,000-crore package for the large industries and the service sectors was approved by lenders as of December 21.
The central bank later increased the fund size to Tk 40,000 crore to cater to the industries located in the economic zones, export processing zones and hi-tech parks.
Mohammed Amirul Haque, managing director of Premier Cement Mills, which also borrowed funds under the package, said the company had seen an 80-90 per cent restoration of businesses in recent months riding on the increase in demand from the public sector.
Cement manufacturers have seen a recovery of 70-80 per cent, according to Haque.
A portion of the SMEs with strong links to banks have received loans.
The members of the Bangladesh Association of Software and Information Services (BASIS), a national trade body for software and IT-enabled services, secured loans smoothly compared to the entrepreneurs in other CMSMEs.
"This has helped the firms recover excellently," said Rashad Kabir, managing director of Dream71 Bangladesh, a software and mobile application developer.
Some banks have agreed to give loans to the firms without collateral, said Kabir, also a director of the BASIS.
"The country now faces a K-shaped recovery, which will not bring good for the economy at all," said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.
Data on the recovery is not available, but it is predicted that the economy has recovered 70-80 per cent, he said.
"The recovery is not equal given the business performance of all sectors."
The central bank should extend the credit guarantee scheme to the SME sector such that small businesses can manage loans without collateral.
"The size of the ongoing stimulus package for the CMSME sector should expand considering the volume of their business," said Mansur, also the chairman of Brac Bank.
A large number of CMSMEs are unable to provide documents to banks, such as tax identification number (TIN) certificate and trade licence, said Zahid Hussain, a former lead economist of the World Bank's Dhaka office.
"The government should take initiatives to disburse loans through microfinance institutions."
Both the Palli Karma-Sahayak Foundation and the Microcredit Regulatory Authority can be involved to speed up the process, he said.
Nazneen Ahmed and Kazi Iqbal, senior research fellows at the Bangladesh Institute of Development Studies, echoed the same.
NGOs can play an important role in giving loans to the CMSME sector under the supervision of the PKSF to reduce their economic losses, they said.
However, some small businesses got loans from banks, but the way it was disbursed was quite unfair, said two business leaders.
For instance, six to seven entrepreneurs in Saidpur of Nilphamari producing exportable jackets, t-shirts and cargo pants, have taken loans from the stimulus fund.
But banks disbursed the loans by adjusting their previous current credit (CC) accounts, said Md Akhtar Hossain Khan, an entrepreneur in Saidpur.
"This means the businesses got no cash from banks. They, however, enjoyed some interest rate subsidy," said Khan, also the president of the Exportable Small Garment Owners Group.
There are around 250 entrepreneurs who have recovered around 35 per cent of their businesses, he said.
Under the stimulus package for the CMSME sector, the loans are being given at 9 per cent interest. Of the lending rate, 4 per cent will be borne by the borrowers and 5 per cent by the government.
Abdur Razzaque, president of the Bangladesh Engineering Industry Owners Association, said entrepreneurs in the sector had barely got finance from banks.
A few of the 5,000 members affiliated with the association borrowed under the stimulus package, but banks have adjusted the loans with their previous CC accounts, he said.
"Banks should not exercise this as clients will be deprived of a proper output from the fund to revive their business," said Syed Mahbubur Rahman, managing director of Mutual Trust Bank.
The businesses in the agriculture sector have not managed adequate loans from the stimulus fund as well.
As of December 15, banks disbursed 56 per cent of Tk 5,000-crore stimulus package for the farming sector.
The implementation of the Export Development Fund has got momentum as Tk 9,248 crore has been distributed against the package amount of Tk 12,750 crore as of December 22. Large industries usually get credit support from the facility.