Cottage Sector, SMEs: Tk 2,700cr fresh stimulus unveiled

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With small businesses still struggling to recover from the pandemic-induced monetary slowdown, the government has rolled out two fresh stimulus packages involving Tk 2,700 crore to improve the cottage industry and SMEs and extend the social security scheme for the elderly and widows in poverty-stricken areas.

Primary Minister Sheikh Hasina yesterday approved the brand new schemes also targeted at improving the living benchmarks of rural marginalised persons, according to a good finance ministry statement.

"The implementation of the brand new packages will begin soon," it reads.

With these two, the federal government has so far rolled out 23 bailout packages announced at different times since March this past year to absorb the monetary shock from the coronavirus pandemic.

The quantity of financial assistance now stands at Tk 124,053 crore, 4.44 percent of the country's GDP.

The approval of the brand new schemes comes following recommendations from various stakeholders during a series of dialogue organised recently by the finance ministry on overall areas of the stimulus packages.

At the discussions, organization leaders, government officials and representatives from banks, development partners and agencies suggested growing the credit coverage through government and semi-government agencies related to the cottage industry and small and method enterprises (SMEs).

They also recommended steps to improve the living standards of marginal persons and expand the social safety coverage for the indegent, added the finance ministry statement.


Under the first bundle involving Tk 1,500 crore, the federal government will give loans to micro and cottage entrepreneurs through various government and semi-government agencies like the SME Foundation, the BSCIC and Bangladesh NGO Foundation to infuse dynamism in to the rural market amid the pandemic.

Of the total amount, Tk 300 crore will be supplied to the SME Foundation for growing its functions for the cottage industry and SMEs alongside helping the feminine entrepreneurs.

The SME foundation will disburse loans among the small businesses and entrepreneurs hit very difficult because of the economic downturn due to the pandemic, said finance ministry officials.

Besides, Bangladesh Compact and Cottage Industries Company (BSCIC) will get Tk 100 crore under the package.

The state-run corporation, established to aid small initiatives across the country, provides loans to small entrepreneurs and commercial units setup in the BSCIC estates under its existing credit programmes.

The package also includes financial support for business initiatives by women who suffered as a result of economic slowdown.

Joyeeta Foundation, a federal government initiative to support women's ventures and empower women of all ages financially, will get Tk 50 crore. In addition to the loans, the basis provides training to women entrepreneurs.

The NGO Foundation will get Tk 50 crore for providing small loans through NGOs.

Besides, Social Development Basis, Palli Daridro Bimochon Base, and Bangladesh Palli Advancement Board are certain to get Tk 300 crore each and Small Farmers Production Foundation Tk 100 crore.

The government hasn't yet chosen the interest levels for the loans to be provided through each one of these organisations and agencies, said finance ministry officials.

"Before releasing the money, the Finance Division might discuss and assessment their existing prices and fix it. But the beneficiaries will get the loans at a lower life expectancy rate," said among the officials, seeking anonymity.

In March this past year, the federal government announced a Tk 20,000-crore stimulus package for the cottage, micro, small and moderate enterprise (CMSME) sector following the pandemic hit the united states. However, the disbursement rate of the loans was low compared to that for the large industrial and service sectors.

Speaking with The Daily Star, Zahid Hussain, ex - lead economist for the Environment Bank's Dhaka business office, said, "They are steps in the proper direction, however the devil is in the facts, as always."

The main element parameters of the Tk 1,500-crore package for CMSMEs is unclear, he described.

"The amount of money will be provided as credit to enterprises in the rural areas. Exactly what will be the interest rate at the recipient level and the repayment period? Who'll bear the risk?"

The inclusion of medium-sized enterprises may frustrate the target since they are not exactly the most distressed and deprived of assistance under the previous packages, he said.

The involvement of the NGOs and semi-government institutions is welcome, but one cannot but wonder if the assistance is spread too thin across way too many institutions, Zahid said.

Suggesting overview of the distribution of allocations to these establishments predicated on performance, he explained the entire package could be provided because grants to micro, cottage and small enterprises confronted with existential threats.

"Various of them are not in a position to take on additional debt because of depressed income flows as business continues to be dull, although perhaps much better than in the first 50 percent of 2020. A one-shot infusion of grant funds would help recapitalise and thereby preserve these enterprises afloat." 


Beneath the Tk 1,200-crore bundle, all disadvantaged seniors, widows and woman divorcees in 150 poverty-stricken upazilas of the country are certain to get cash assistance. The beneficiaries are certain to get an allowance of Tk 500 per month.

The package will be implemented in fiscal 2021-2022.

The amount is likely to increase by 5 percent from another spending plan as the finance ministry has recently determined in this regard, said the official of the ministry.

However, the federal government is but to finalise the number of beneficiaries.

It started giving the money incentives to most those who are categorized as the beneficiary groups in 112 poverty-stricken upazilas following the pandemic hit the united states.

Discussing the allowance, Zahid stated it seems the excess social assistance might be provided to new beneficiaries so that all the elderly persons and distressed women in the rural areas happen to be included in fiscal 2022.

"Proper report on eligible beneficiaries and pilferage-free transfer of the money payments have been and remain the key challenges in this regard. The adequacy of the benefits per person continue to be an open question," he said.

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