Small, micro, small and medium-sized business stimulus loan disbursements were well below the mark, yet midsize businesses made the most of it for their closer kinship with the banking channel. formal.
The minor companies of the beneficiary group were only spectators.
Such a picture of stimulus aid came out of the latest circular issued by the central bank of Bangladesh. In the latest notification, the Bangladesh Bank further relaxed some rules related to the implementation of the stimulus plan for the cottage-micro-small section.
The BB has so far amended its circular about 12 times to facilitate CMS funding. But, of the 72 percent of disbursements, a large chunk of the pie went to medium-sized entities, according to the banks. Banks, however, declined to share details on the percentage of loans made to midsize entities.
To ensure access to the CMS, the Bangladesh Bank in the last notification ordered the banks to disburse 70 percent for them and only 30 percent for the medians. The package, unlike the case of large corporate houses, has also been extended for the CMS until June 30, 2022.
Based on an agency report, the Financial Institutions Division of the Ministry of Finance has prepared a good line on how to reach the CMS group of companies.
He suggests that if someone does not have a business license, a recommendation from a local manager can be accepted to be eligible for loans.
He further suggested Tk 100 billion as refining programs for a real CMS, and the banks will pay MFIs who will eventually sell them to CMS clients at an interest cap of just over 9.0%. The proposed interest rate is 9.5 percent for them, including a portion of government grants. But it hasn’t been able to materialize so far either.
Abul Kasem Khan, President of BUILD [Business Initiative Leading Development], said: “Of the CMS disbursements, most of the benefits have gone to the media sector as they have banking relationships.”
In the middle sub-sector, there are those who maintain an investment of at least Tk 150 million in manufactured products.
The government pays 5.0% of the interest and the remaining 4.0% is paid by the borrower under subsidized financing programs, aimed at economic recovery from the pandemic disruptions.
The Bangladesh Bank warned the banks that there would be no hidden charges, and if found, severe action would be taken against the banks and financial hunches. The repayment will be monthly and quarterly.
Dr Raihan from SANEM says: “I won’t talk about the medium-sized entities because they have good banking relationships and are more or less the beneficiaries of the package. But CMS are largely overlooked.
Dr Zaid Bakht, chairman of the public Agrani bank, says the Bangladesh Bank has allocated Tk 9.5 billion to his bank for CMSMEs.
“I can disburse easily to large corporate borrowers, but I cannot or reach small businesses as easily.”
Following the poor disbursement of loans to CMS despite prolonged delays on several occasions, the Bangladesh Bank has in the meantime opened a new mechanism called the Credit Guarantee Scheme to increase the financing of micro-cottages and small enterprises.
But, again, he received bad responses from the banks.
Dr Zahid Hussain finds that the central bank’s credit guarantee system is subject to strict rules. The fees are higher. Defaulters have to wait three years to apply for loans under the scheme.
“No bank is interested in it.”
He says there are a number of refinancing programs introduced by the central bank, the largest of which is worth Tk100 billion. But the banks are not interested because they find these funds cumbersome or difficult to respect.
Abul Kasem Khan of BUILD says there are actually two ways to finance the CMS Group: an easy credit guarantee system and loan disbursements should be based on cash flow rather than mortgage and others. strict requirements. “Banks should authorize loans by seeing the cash flow of a particular entity, not the collateral,” he commented.
On the aspired economic recovery, Mr. Khokon Chowdhury estimates that it will take two to three more years to return to pre-Covid levels. He is optimistic because sales are gradually increasing following the reopening of the economy. The small trader also remains hopeful about the government’s decision to include them through various refinancing programs.
Getting a loan from MFIs is easy. Time is very important, otherwise business entities die, he says.