BB to declare Tk 20b credit insurance scheme for SMEs

Bangladesh Bank is going to announce a Tk 20 billion credit guarantee insurance scheme for the small and medium enterprises (SMEs), said an adviser of the Prime Minister on Tuesday.

The scheme will be introduced as the commercial banks are reluctant to disburse loans among the SMEs in accordance with the interest rate cap at 9 per cent, Prime Minister's Private Industry and Investment Adviser Salman F Rahman said.

He said the government has already announced a subsidized stimulus package for the pandemic-hit SMEs, but the banks still have not come forward for the small businesses.

"So what we are now going to do is to announce a credit insurance scheme for the SMEs.The announcement may come next week from the central bank," he said, speaking at a virtual MoU signing ceremony between Prime Bank and Bangladesh Computer Samity (BCS) to finance micro, small and medium enterprises in the ICT sector across the country.

Speaking as the chief guest, Mr. Rahman said the banks can insure loans to SMEs under this scheme if they want guarantee against their loans.

He said the government will increase the amount of insurance scheme if this Tk20 billion becomes successful.

The adviser said that traditionally the SME loan cost was always higher. So, when the government capped the interest rate at 9 per cent, many banks backtracked from the SMEs sector.

Credit insurance is a type of insurance policy purchased by a borrower that pays off one or more existing debts in the event of a death, disability, or in rare cases, unemployment.

Mr. Rahman thanked Prime Bank for coming forward to disburse loans for the SMEs sector whereas many banks are showing reluctance to provide the loans.

He said that the banks can make profit even from SME loans if they disburse it efficiently. "Banks need to learn how to manage SME loans."

He said there is a fear in the banks that they might not get back the loans from the SMEs. He urged the SMEs to come forward to build trust in banks so that they can disburse loans.

He said there are two kinds of loan defaulters - one is failure of business which is very natural and another is intentionally not paying back the loans. He said the numbers of willful defaulters are very few.

Mr. Rahman said the 4th industrial revolution has already at the doorstep earlier than expected due to the coronavirus. "So we have to work fast to achieve the goals."

He said the ICT could take the place of readymade garment (RMG) as exporting goods.

Addressing the meeting, Prime Bank Managing Director Rahel Ahmed said there is no future for the country without ICT.

He said Prime Bank has identified ICT as potentials and planned to invest thinking about future of the sector.

BCS President Shahid Ul Munir thanked the Prime Bank for coming forward to finance MSMEs in the ICT sector during this bad time.

According to Prime Bank, the MoU will create a facilitating business ecosystem for thousands of MSMEs in ICT businesses across the country. The bank will disburse up to Tk5.0 million in collateral-free loans to the BCS members.

Head of MSME of Prime Bank Md Syed M Omar Tayub said Prime Bank has already formed alliance with four other organizations in the ICT sector.

"With BCS, we conclude the process of forming alliance with ICT sector," he said. "The bank has already disbursed Tk50 million collateral-free loans among those ICT entrepreneurs."