Make stimulus loans collateral-free for small businesses
The central bank should make lending to pandemic-hit cottage, micro, small and medium enterprises (CMSMEs) from the stimulus package collateral-free to accelerate disbursement of the fund as much of these are struggling to remain afloat as a result of a shortage of finances, speakers said yesterday.
Bangladesh Bank must have asked banks never to demand any collateral when it announced the Tk 20,000-crore stimulus package so that a substantial number of the cash-strapped CMSMEs could avail the soft loan, they said.
"The central bank must have taken care a whole lot earlier to greatly help CMSMEs overcome the Covid-19 fallout," said Syed Nasim Manzur, managing director of Apex Footwear Ltd and a core group person in the Citizen's Platform for SDGs, Bangladesh.
"Studies also show that the units that availed the amount of money from the fund have benefited," said Debapriya Bhattacharya, convenor of the Citizen's Platform for SDGs, Bangladesh and a distinguished fellow of the Centre for Policy Dialogue."
"The CMSMEs are lagging because their voices weren't raised strongly with the government's decision-making level."
Industries Minister Nurul Majid Mahmud Humayun asked banks to help ease rules and disburse collateral-free loans to the CMSMEs as the enterprises play significant roles in the national economy.
They made these comments while speaking at a virtual dialogue on 'post-pandemic status of CMSMEs and effectiveness of stimulus packages'.
The Citizen's Platform for SDGs Bangladesh, a platform of non-state actors and their networks and associates, and the business enterprise Initiative Leading Development (BUILD) jointly organised the meeting.
CMSMEs play a substantial role in the country's economy and employment generation.
The quantity of CMSMEs in Bangladesh is 7.76 million. Of these, 99.84 % are privately owned, said Abul Kasem Khan, chairperson of the BUILD, in his keynote paper.
Of the total professional employment, 80 % are in the CMSMEs. The units take into account 35.5 % to 50 per cent of the full total employment in Bangladesh.
Tk 59,292 crore can be found in the form of loans for the CMSMEs under different categories. Of the sum, Tk 4,120 crore, or 20.5 %, was disbursed among 11,183 companies from the Tk 20,000 crore stimulus package for the CMSME.
Another Tk 1,060 crore was disbursed from another stimulus package of Tk 3,000 crore, Kasem said.
Nasim Manzur said the government must have given subsidies on VAT, tax, utilities and factory and office rents through the difficult period to CMSMEs in order that they can survive and continue their operations.
Many CMSMEs have had to shut their business as a result of high rents and office rents. The government must have announced the stimulus packages in consultation with other stakeholders in order that all units get the fund properly, he said.
The entrepreneur called for involving NGOs, microfinance institutions and local chambers to ensure that the real sufferers could be determined and the funds could be disbursed on time.
Many CMSMEs need to get a source tax waiver during this tough time and district chambers should introduce help desks for CMSMEs to secure the fund, said Manzur.
Bhattacharya said it isn't wise only to depend only on banking channels to bankroll CMSMEs.
"Alternatives should also have already been thought about a whole lot earlier because many enterprises have been doing business for many years but they remain unbanked."
Momtaz Uddin Ahmed, an honorary professor of economics at the University of Dhaka, said there should be an updated database of the CMSMEs in order that every unit can avail financing from the fund. He supported financing CMSMEs through MFIs.
Mustafizur Rahman, another distinguished fellow of the CPD, said CMSMEs not only serve the neighborhood markets. In addition they help a whole lot in value addition for export-oriented sectors.
Shams Mahmud, president of the Dhaka Chamber of Commerce and Industry, said you will find a perception that the amount of money from the stimulus package is free. "People should change such mentality since it is a loan, but at a lower interest rate."
This is of SMEs should be changed to help make the initiative time-befitting, the industries minister said. He committed to preparing a database of the CMSMEs.
Syed Almas Kabir, president of the Bangladesh Association of Software and Information Services, said none of just one 1,500 members of the association received loans from the stimulus packages since it companies cannot provide any collateral.
IT and software companies don't have physical assets to be mortgaged as collateral. However, BASIS members secured finance from two private commercial banks under special arrangements, he said.
Anwara Ferdousi, president of the Rangpur Women Chamber of Commerce and Industry, said handicrafts and beauty parlours will be the worst suffers because they did not get loans from banks. "Banks are not giving loans to small entrepreneurs as a result of collaterals."
Humaira Chowdhury, co-founder and managing director of Frontier Technologies Ltd, said she actually is not getting loans from banks although her company includes a strong financial base.
She could not provide collateral as she's not got land documents from her paternal side. "So, banks aren't giving me loans."
Syed Abdul Momen, head of SME of Brac Bank, said of his bank's total portfolio of Tk 12,000 crore, Tk 10,000 crore are collateral-free loan for the CMSMEs.
Some 70 % to 80 % of the CMSMEs that contain received the loan from the stimulus package have returned with their businesses, he said.
Asif Ibrahim, chairman of the Chittagong STOCK MARKET, also spoke.
