Small businesses yet to get full stimulus

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

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As of March 11 this year, banks had disbursed Tk 12,802.67 crore to the sector, which was 64.01 percent of the total funds, according to the latest data by the Bangladesh Bank.

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

The interest rate for the fund would be 9 percent, with the government bearing 5 percent as subsidy and the remaining 4 percent borne by borrowers.

Then, the BB set a deadline to execute the disbursal of the funds by October 31 last year, but most banks were found to have failed to reach targets of loan distribution among the affected CMSME entrepreneurs within the stipulated time.

This prompted the central bank to further extend the deadline till March 31 this year, for the third time.

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

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

The deadline for executing the stimulus fund is nearing its end, but so far, several banks have been able to disburse only a small amount of loans to the pandemic-affected CMSME sector.

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

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

The 9 percent ceiling for lending is the major reason behind the slow disbursement of the sector, said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.

“Where the interest rate for lending is up to 25 percent in microfinance, it is only 9 percent in the case of banks, which is not profitable for them. The operating cost of a bank -- especially for SME loan disbursement -- is much higher. So, the lenders do not want to take the risk by lending at the 9 percent rate,” he had told Dhaka Tribune a few months ago.

It takes more time to scrutinize the documents of SMEs and that is another reason behind the slow disbursement to the CMSME sector, said bankers.

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