Small businesses yet to receive stimulus even as deadline looms

By March 11 this year, banking institutions had disbursed Tk 12,802.67 crore to the sector, that was 64.01 per cent of the total funds

Disbursal of loans to the cottage, micro, small, and moderate enterprises (CMSMEs) from the Tk 20,000 crore stimulus fund features been sluggish, regardless of the central bank's instruction to disburse the entire fund by this month.

By March 11 this season, banks had disbursed Tk 12,802.67 crore to the sector, which was 64.01 per cent of the full total funds, according to the latest info by the Bangladesh Bank.

On April 13 last year, based on the government’s announcement, the BB issued guidelines on providing functioning capital facilities amounting to Tk 20,000 crore to the CMSME sector.

The interest for the fund will be 9 per cent, with the federal government bearing 5 per cent as subsidy and the remaining 4 % borne by borrowers.

Therefore, the BB set a deadline to execute the disbursal of the cash by October 31 last year, but most banking institutions were found to possess failed to reach targets of loan distribution among the influenced CMSME entrepreneurs inside the stipulated time.

This prompted the central bank to help expand extend the deadline till March 31 this season, for the 3rd time.

To improve stimulus fund disbursement to CMSMEs, the central bank in July last year announced a credit assurance scheme worth Tk 2,000 crore.

Thanks to the scheme, CMSMEs that lacked satisfactory collateral would be able to get bank loans. The scheme would give policy to the loans disbursed from the Tk 20,000 crore aid bundle for the sector.

The deadline for executing the stimulus fund is nearing its end, but up to now, several banks have already been in a position to disburse only a tiny amount of loans to the pandemic-affected CMSME sector.

Till March 11 this season, state-run Janata Bank disbursed Tk 103.15 crore from the fund, that was at 11.84 per cent of its target. ICB Islami Lender disbursed 2.50 %; Bangladesh Commerce Lender disbursed 30.52 %; foreign Habib Lender disbursed 25 per cent; IFIC Bank disbursed 21.90 %; NCC Bank disbursed 26.47 %; Global Islamic Bank disbursed 26.78 %; and Shimanto Lender disbursed 4 per cent to the CMSME sector.

Sonali Bank, Agrani Lender, Bangladesh Development Lender, RAKUB, BRAC, DBBL, EBL, Modhumoti Lender, and Uttara Bank also have disbursed a good part of funds among CMSMEs.

The 9 % ceiling for lending may be the major cause of the slow disbursement of the sector, said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.

“Where the interest for lending is up to 25 per cent found in microfinance, it is only 9 per cent regarding banks, which is not profitable for them. The functioning expense of a bank -- especially for SME bank loan disbursement -- is a lot higher. So, lenders do not prefer to take the chance by financing at the 9 per cent rate,” he had told Dhaka Tribune a few months ago.

It takes additional time to scrutinise the paperwork of SMEs and that's another cause of the slow disbursement to the CMSME sector, said bankers.

Till March 11 this season, 83,760 debtors of the CMSME sector got loans from the fund, as per BB data.