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 you will find a vast swathe of domestic industries and small- and medium-sized enterprises that has been hit, arguably, just as hard. However they remain criminally neglected so far.
An assistance of sorts was offered to them on March 19, when the Bangladesh Bank (BB) asked banks never to consider borrowers as defaulters if indeed they fail to repay instalments until June 30 this year.
But, their accounts will still continue accrue interest through the period, which means this begs the question: could this move from BB be of genuine help them?
When economic activities have already been near standstill for an excellent a month now and with no signs of things getting back again to normal in the near future, could it be rational to assume that they might manage to service the loan accounts filled with the accrued interest in two months' time?
Banks are unable to waive the interest payment for entrepreneurs because they now face a variety 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 should be protected from the monetary fallout in the interest of the country's GDP growth."
One way the federal 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 receive this relief -- the habitual defaulters must be left out of the facility, come what may," he added.
Salehuddin Ahmed, a former governor of the central bank, recommended outsourcing the duty of separating the nice borrowers and entrepreneurs from the bad kinds to banks.
"The federal government should address the issue promptly, or else a huge number of local manufacturers will be required to summary their businesses," he added.
Banks don't have any strength to waive the interest because they need to provide interest to depositors aswell, said Ahsan H Mansur, executive director of the Policy Research Institute.
The lenders are actually burdened with the financial packages declared by the federal government.
For instance, lenders will never be allowed to realise any instalment from borrowers until June but which has put pressure on the funds.
Besides, the central bank asked mobile financial services never to impose any charge on deposits amounting to Tk 1,000 each day, as a result which the vendors are losing profits.
"The government ought to 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 offered to the banks and the MFS players.
"And regrettably, the federal government hasn't taken any measure to shield the tiny entrepreneurs, when they are the among 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 continued to urge the central bank to create a particular refinance schemes for the SME sector such that they can get loans at a discounted rate compared to the existing market rate for a soft landing to the drop in financial activities.
As of September this past year, banks and non-bank finance institutions gave out Tk 205,491 crore to SMEs, which is approximately 20 % of their total outstanding loans, according to data from the central bank.
