Why are SMEs not availing the govt directed loan opportunities?

The pandemic has affected all businesses, big or small, in the country as elsewhere in the world. But while the losses they suffered varied widely—with the small businesses being disproportionately affected—big businesses, particularly large industries and the service sector, have been relatively quick to find their way to recovery by accessing loan opportunities granted under the government-announced stimulus packages, as well as by utilising the business-friendly environment following the lifting of the lockdown. By contrast, small and medium enterprises (SMEs) and low-income groups, including farmers, have been slow to respond to and access the loan benefits, largely because of the reluctance of the banks, according to a report by The Daily Star. This is indeed a cause for concern. For months, we have been urging the authorities to expedite the loan disbursement process for the hardest hit groups and businesses, but the progress so far has been sluggish to the point of being disappointing.

This is despite recent initiatives by the central bank and the government to speed up the process. While 81.87 percent of the Tk 33,000 crore package for large industries and the service sector was approved by the lenders as of October 6, only about a quarter of the Tk 20,000-crore package dedicated for the SME sector was disbursed, amounting to Tk 5,882 crore among 26,664 borrowers since September. The situation is no less disconcerting for the farming sector which, as of September 30, saw only Tk 1,869 crore disbursed among 87,526 borrowers under the Tk 5,000-crore package for the sector. Several factors have been identified for the slow developments in the SME sector, including the reluctance of lenders to promote the packages as well as their "cautious stance" due to the fragile health of the SMEs. Usually, SMEs make a large portion of their profit ahead of Eid-ul-Fitr and Eid-ul-Azha, but they failed to do so during the last two festivals. They have also been less organised compared to the big businesses, which have been quick to submit the required documents and also their business continuity plans to the banks, helping them make a decision quickly, according to an expert.

Whatever the circumstances, the central bank cannot avoid its responsibility in this regard. It must do more to remove all regulatory and circumstantial barriers to accessing the loans and to get the banks to speed up loan disbursement among the small businesses and low-income professionals. Also, considering the large number of people who depend on the cottage, micro, small and medium enterprises in Bangladesh, the current allocations under the packages also need to be increased. SMEs are the backbone of our economy. They contribute about one-fourth of the country's gross domestic product, delivering jobs, growth and prosperity for millions of people across the country. We must do more for them, for our own good.