20/11/2020
In October 2020, several analysts talked about making stimulus loans collateral-free for small businesses at a virtual dialogue on “post-pandemic state of cottage, micro, small and medium enterprises (CMSMEs). The Citizen’s Platform for SDGs Bangladesh, a platform of non-state individuals, their networks and associates and the Business Initiative Leading Development (BUILD) jointly organized the meeting.
Speakers unanimously stated that the central bank should make lending to pandemic-hit CMSMEs collateral-free to help aid in their financial growth as many of them are struggling to survive due to shortage of finances. They added that Bangladesh Bank should have asked banks not to demand any collaterals when it announced the Tk 20,000 crore stimulus package so that a significant number of CMSMEs could avail such loans.
Syed Nasim Manzur, managing director of Apex Footwear Ltd and a core group member of the Citizen’s Platform for SDGs said, “The central bank should have taken care a lot earlier to help CMSMEs overcome the COVID-19 fallout. The government should have given subsidies on VAT, tax, utilities, factory and office rents during this difficult period.” Debapriya Bhattacharya, convenor of the Citizen’s Platform for SDGs, Bangladesh and a distinguished fellow of the Centre for Policy dialogue said, “Studies show that the units that availed the money from the fund have benefited. The CMSMEs are lagging because their voices were not raised strongly with the government’s decision-making level. Alternatives should have also been thought about a lot earlier as many enterprises have been doing business while remaining unbanked.”
Industries minister Nurul Majid Mahmud Humayun asked banks to distribute collateral-free loans to the CMSMEs as the enterprises play significant roles in the national economy.
There are7.6 million CMSMEs in Bangladesh, of which 99.84% are privately owned. 80% of the industrial employment in the country occurs through CMSMEs. This employment accounts for about 50% of the total employment in Bangladesh. Tk 59,292 crore is available in the form of loans for CMSMEs under different categories. From the Tk 20,000 crore stimulus package for the CMSMEs, Tk 4,120 crores (20.5%) was distributed among 11,183 CMSMEs. Tk 1,060 crores was distributed from another stimulus package of Tk 3,000 crores.
Many CMSMEs have shut down their businesses because of high rents. It would have been better if the government announced stimulus packages in consultation with other stakeholders so that all units get the fund properly. Several entrepreneurs called for involving NGOs, microfinance institutions and local chambers so that the real victims could be identified and the funds can be disbursed on time. Many CMSMEs need a temporary source tax waiver and district chambers should introduce help desks for CMSMEs to secure the funds.
Momtaz Uddin Ahmed, ahonorary professor of economics at the University of Dhaka, said, “There should be an updated database of the CMSMEs so that every unit can avail can avail funds easily from any future funds received.” Shams Mahmud, president of the Dhaka Chamber of Commerce and Industry, said, “There is a perception that the money from such stimulus packages is free. People should change their mentalities as it is a loan, just at a lower interest rate. Industries minister Nurul Majid Mahmud Humayun committed to prepare a database for the CMSMEs.
None of the members of the Bangladesh Association of Software and Information Services received loans from the stimulus packages as IT companies cannot provide any collateral as they do not have physical assets that can be mortgaged.
