Loan disbursement from the stimulus package dedicated to cottage, micro, small and medium enterprises was far below the mark, but, yet, midsize ones made the most out of it for their closer kinship with the formal banking channel.
Businesses minors in the beneficiary group were just lookers-on.
Such a picture of the stimulus handouts came out of the latest circular issued by the central bank of Bangladesh. In the latest notification, the Bangladesh Bank further eased some rules related to the implementation of the stimulus package meant for the cottage-micro-small section.
The BB has so far amended its circular about 12 times to facilitate the funding of the CMS. But, of the 72-per cent disbursement, a large chunk of the cake went to the medium entities, according to banks. Banks, however, declined to share details on what percentage of loans the midsize entities availed.
To ensure access for the CMS, the Bangladesh Bank in the latest notification ordered the banks for 70-per cent disbursement for them and only 30 per cent for the medians. The package, unlike the cases of large corporate houses, has also been extended for the CMS up to June 30, 2022.
Based on an agency report, the financial institutions division of the ministry of finance prepared a good line on how to reach out to the CMS business group.
It suggests that if anyone does not have a trade licence, a recommendation from a local headmaster may be accepted to be eligible for loans.
It further suggested Tk 100 billion as refining schemes for genuine CMS, and the banks will disburse to the MFIs who ultimately will give it over to the CMS clients at a little over 9.0-per cent interest cap. The rate of interest is proposed 9.5 per cent for them, including a portion of government subsidies. But it also could not be materialised so far.
Abul Kasem Khan, chairperson at BUILD [Business Initiative Leading Development], said: "Of CMS disbursement, most benefits went in favour of the medium sector as they have banking relationships."
In the medium sub-sector are those who maintain investment of at least Tk 150 million in manufacturing products.
The government pays 5.0 per cent of the interest and the remaining 4.0 per cent is paid by the borrower under the subsidised funding packages, meant for economic recovery from the pandemic disruptions.
Bangladesh Bank warned the banks that there would be no hidden charges, and if found, stern action would be taken against the banks and financial intuitions. The repayment will be monthly and quarterly.
SANEM's Dr Raihan says: "I will not talk about the medium entities as they have good banking relations and are more or less the beneficiary of the package. But the CMS are largely left out."
Dr Zaid Bakht, Chairman of the state-owned Agrani Bank, says that Bangladesh Bank allocated Tk 9.5 billion to his bank for the CMSMEs.
"I can disburse to big corporate borrowers easily but cannot or reach the small businesses so easily."
In the wake of poor disbursement of loans to the CMS despite extending deadlines many times, Bangladesh Bank, in the meantime, opened a new mechanism named credit-guarantee scheme to boost the financing to the micro-cottage-and-small enterprises.
But, over again, it received poor responses from the banks.
Dr Zahid Hussain finds the central bank's credit-guarantee scheme beset with stringent rules. The fees are higher. The defaulters need to wait three years for filing an application for getting loans under the system.
"No banks showed interest in it."
He says there are a number of refinancing schemes introduced by the central bank, including the biggest one worth Tk 100 billion. But banks are not showing interest in those as they find such funds either cumbersome or hard to comply with.
BUILD's Abul Kasem Khan says actually there are two ways to fund the CMS group: easy credit-guarantee scheme and loan disbursements should be based on cash-flow instead of mortgage and other stringent requirements. "Banks should allow loans seeing the cash flow of a particular entity, not collateral," he commented.
About the aspired economic recovery, Mr Khokon Chowdhury believes it will take two to three years more to return to the pre-covid levels. He is optimistic as sales are gradually rising following the reopening of the economy. The small trader also holds hope about the government's move to include them through different re-financing schemes.
Getting a loan from the MFIs is easy. Time is very much important otherwise business entities die, he says.