Small businesses see stimulus funds at last
The cottage, micro, small and medium enterprises, who were among the worst hit for the pandemic, appear to have started seeing the stimulus funds of late after initial reluctance from banks in disbursing credit to the sector.
So much that the disbursement to the sector has overtaken that to the large industries, which had started on a blistering pace.
As of March, 72.3 percent of the Tk 20,000 crore announced for the CMSME sector on April 13 last year has been disbursed to 91,427 firms, according to a finance ministry document.
"There was much outrage about the slow disbursement in the media and at the policymaking level," said Zaid Bakht, chairman of Agrani Bank.
This prompted the central bank and the finance ministry to crank up the pressure on the banks and non-bank financial institutions to meet their disbursement targets. The deadline for disbursement was extended several times, with the latest deadline being June 30.
"It roused the banks into action, so the situation improved," said Bakht, whose bank overshot its disbursement target.
Initially, many CMSMEs were unsure whether they qualified for funds from the stimulus package, which came at 9 percent interest but they have to pay just 4 percent, with the government footing 5 percent by way of subsidy.
Normally, CMSMEs have to pay as much as 25 percent interest for loans.
But later, banks started raising awareness and many firms came forward, Bakht added.
On the other hand, banks have taken their feet off the gas on their disbursement from the Tk 40,000 crore package announced for pandemic-hit large industries.
As of March, 66.5 percent of the package has been disbursed to 3,118 firms.
Bakht says the slower disbursement is because the private banks are showing reluctance now in lending to large industries.
"When the package was announced, the private banks made sure their reliable large borrowers got funds from the package. But now, they are being more careful."
The state banks though are not being as selective, he said, adding that Agrani achieved its disbursement target for the sector, too.
A total of 23 stimulus packages involving Tk 128,441 crore -- which is 4.9 percent of the country's GDP --was announced by the government since the novel coronavirus put down its roots in Bangladesh in March last year.
Of the schemes, 11 are credit-based stimulus packages involving Tk 103,700 crore.
As of March, their implementation status stands at 70.4 percent.
Of the 11 packages, seven involving Tk 87,750 crore are being implemented through the banking system, the tenure of many of which will come to an end in June.
"Since the pandemic is not nearing its end anytime soon, the government is mulling over extending their tenure by another 2-3 years," said a finance ministry official requesting anonymity as he is not authorised to speak with media.
The government will most likely set aside Tk 12,000 crore as interest subsidy for three years for the loans in the upcoming budget due to be unveiled on June 3, he added.
However, many remained out of the purview of the stimulus packages, particularly those engaged in informal work, whose livelihood was battered for the necessary movement control orders imposed to slow the spread of the highly contagious pathogen.
Experts said the schemes could not reach them due to a lack of a comprehensive database.
"There is a challenge in reaching assistance under the stimulus packages to the informal sector workers since it is difficult to select the real deserving people," said Moshiur Rahman, economic affairs advisor to the Prime Minister, at a webinar on Sunday.
He, however, said the government is trying to take assistance to those who need it badly with the help of local representatives.
Selim Raihan, executive director of the South Asian Network on Economic Modelling (SANEM), a think-tank, suggested setting up a separate window in each bank for disbursing loans to the CMSMEs as they struggle with the existing complicated loan procedure.
"Banks should not think of profit when lending to the CMSMEs under the stimulus packages," he said, while advising the government to enlist the service of the non-governmental organisations too.
There might be risks of default but the government needs to take some risk.
"The micro and small enterprises generate huge employment and are integrated with different supply chains of our economy. They are lying in a vulnerable stage and have no strong voice," Raihan added.
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