Exigency of loans for CMSMEs

The sanctioning of loans for any sector of economy should ideally be decided by factors spurring economic growth. The disbursement of a sizeable percentage of the total disposable loans of banks runs the risk of distorting the natural mechanism of investment. But when it comes to patronising a fledgling sector neglected long on account of faulty or unresponsive policies, the risk is worth taking. Cottage, Micro, Small, and Medium Enterprises (CMSMEs) with a share of 90 per cent industrial units and 80 per cent industrial employment constitute a sector that unfortunately has received a step-brotherly treatment compared to large industries. So the Bangladesh Bank (BB) has felt the urgency of righting the wrong not only in the interest of the sector but also in the interest of the country's overall economy.

As a first decisive step, the BB has made it mandatory for banks to disburse loans to CMSMEs at least 25 per cent by this calendar year with the provision of 0.5 per cent annual increase to 27 per cent by 2029. Small enterprises often cannot avail of such government supports because of their lack of collateral. Even many of such small units failed to receive incentive packages the government generously distributed in the post-Covid period as part of bringing about an economic turnaround. To circumvent this constraint the BB has withdrawn the conditions of mandatory Tax Identification Number (TIN) and collateral for enterprises to claim a loan amounting to Tk500,000. Entrepreneurs can obtain this amount on the strength of their business identification number. This is a clear case of easing the process of receiving loan for the small enterprises. Now the banks need to have a sound mechanism for assessing the small ventures' potential for sustainability and expansion of business and even marketing of products either at home or abroad. Fresh exigencies and risks should also be meticulously analysed so that the loanees cannot misuse the fund borrowed.

This country has witnessed massive loan default on account of sanctioning loans to business sharks with an ulterior motive on the part of both parties---the loan sanctioning authorities and the loan receivers. Evidence has it that the rate of defaulters among small borrowers is very low compared to their large counterparts. However, misuse of government or public funds in the name of entrepreneurship or business at no level is desirable. Let there be several monitoring and vigilant teams expert in business and industrial issues including marketing prospects which will make on-the-spot and off-the-spot assessment before recommending loans for units in the sector.

In this respect, Chinese model of CMSMEs can be helpful for emulating with some minor adjustment to the local conditions here. Specialised village-based small enterprises have been the backbone of the industrial might developed in China later on. From the smallest item such as needle, pin, gem clip to calculator to electric car---the range of industrial outputs in China puts every manufacturing country on the planet to shame. China's economy grew in leaps and bounds because of this as well as the low prices of such essential tools and goods. Somewhat regimented, the method of production hardly allows entrepreneurial failure as those are closely monitored and patronised. A congenial entrepreneurial environment can meet the dual challenge of developing a strong economic base and creation of employment for a huge army of unemployed youths in Bangladesh.