Alternative loan release process necessary for small-scale businesses

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Experts and businesses on Wednesday recommended that the government adopt an alternative stimulus package disbursement process for cottage, micro and small enterprises to increase the disbursement of stimulus loans and make the package effective.

The federal government and non-governmental micro-finance institutions (MFIs) should be associated with the disbursement process to ensure that the entities can avail the fund smoothly, they said.

At a virtual policy dialogue on post-pandemic status of cottage, micro, small and medium enterprises (CMSMEs) and effectiveness of stimulus packages, in addition they sought a Bangladesh Bank announcement making the usage of the fund collateral and mortgage-free for cottage, micro and small enterprises.

Fifty per cent of the small, cottage and small enterprises in the united states has so far failed to avail the stimulus loans because of cumbersome, complex and lengthy banking procedures, and banks’ requirement for mortgage and collateral, they said.

They also stressed the necessity for development of a database of CMSMEs for effective disbursement of the stimulus and implementation of any future programmes as the majority of the CMSMEs run their business informally and remain outside the banking network.

Citizen’s Platform for SDGs, Bangladesh and Business Initiative Leading Development (BUILD) jointly arranged the dialogue in the administrative centre.

At the programme, BUILD chairperson Abul Kasem Khan in his keynote presentation said that more than half of the CMSMEs so far cannot avail the fund because of cumbersome and complex banking procedures, lack of formal financial records and previous relationship with banks.

As of August, only Tk 4,120 crore or 20.5 % of the full total Tk 20,000 crore scheme for working capital for CMSMEs was disbursed to 11,183 firms, he said.

‘Loan disbursement towards CMSMEs is slower. Aggressive implementation strategy is required to ensure full disbursement of the rest of the 80 per cent of the fund by October 31,’ he said.

Referring to a Dhaka Chamber of Commerce and Industry survey, he said that 59 % CMSMEs found the loan disbursement process from the package complex, 18 % of them reported lack of relationship with banks.

Bangladesh Small and Cottage Industries Corporation, SME Foundation, Palli Karma-Sahayak Foundation and other state-owned entities should extend more support to CMSEs both in rural and urban areas as the alternative avenues to banking channel, he said.

CMSMEs are hit hard as a result of COVID-19 outbreak and sales of the sectors came down to only 35 % in the time, he said.

Industries minister Nurul Majid Mahmud Humayun said that this is of medium enterprises should be redefined to make sure required fund for CMSEs as medium enterprises ate up the major portion of such funds.

A package only for cottage and small industries is required, he said.

He also said a new policy was required to address the problems, including definition of medium enterprises, database of enterprises and mortgages.

Citizen’s Platform for SDGs, Bangladesh convenor, also Centre for Policy Dialogue distinguished fellow, Debapriya Bhattacharya said that the CMSMEs lagged behind in getting funds from the stimulus package as their voice cannot reach the arena of political and social power.

He said that the government should think about subsidy for the sector as much CMSMEs cannot get loans from banks because of lack of proper connections.

He also advised the federal government to get ready the database of CMSMEs for better implementation of such programmes.

DCCI president Shams Mahmud said that the government should think about alternative funds such as foreign loans, introduction of new products by PKSF and SMEF, to meet the demand of the sectors.

Apex Footwear Limited managing director Syed Nasim Manzur said that the introduction of alternative channels such as MFIs was required to reach unbanked people.

The central bank also needs to make an announcement that mortgage and collateral weren't required for getting the loans, he said.

The CMSMEs also needs to be offered deferment in payment of tax and utility bills to cope with the money flow shortage, Nasim added.

CPD distinguished fellow Mustafizur Rahman, Chittagong STOCK MARKET chairman Asif Ibrahim, Bangladesh Association of Software and Information Services (BASIS) president Syed Almas Kabir, Frontier Technology Limited co-founder and managing director Humaira Chowdhury, Rangpur Women Chamber of Commerce and Industry president Anowara Ferdousi, among others, spoke at the programme. 
Source: https://www.newagebd.net

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