CPD for extending deadline of SME loan repayment

The Centre for Policy Dialogue has recommended extending the loan repayment deadline to three years for Small and Medium Enterprises to fight the fallout of the Covid-19 pandemic.

The local think-tank made the recommendations at a virtual dialogue on Thursday titled ‘CPD’s Recommendations for the National Budget FY2021-22’.

“Small and medium enterprises were the most affected during the first wave of Covid-19 and afterwards. Their challenges continue as Bangladesh suffers from the ongoing second wave of the pandemic, said Towfiqul Islam Khan, senior research fellow of CPD, in his keynote presentation.

“Given the level of vulnerability of SMEs, the loan repayment period for SME loans under stimulus package needs to be extended to three years,” he said.

Considering the vulnerabilities suffered by the SMEs, the government allocated Tk 22,000 crore under the first stimulus package.

Apart from this, the government has rolled out a fresh stimulus package of Tk 2,700 crore to boost cottage industries and SMEs.

On the other hand, Bangladesh Bank issued a policy in March 2021 in support of startups under a special funding facility of Tk 500 crore.

The rate of disbursement, however, was slower than other stimulus packages. As of April 11, 2021, about 68 per cent of the dedicated fund has been disbursed.

The think tank also urged to make the packages and loans women-friendly.

Gender-wise disaggregation shows that 94 per cent of the beneficiaries of loans under this package were male and only 6.0 per cent were female, said CPD.

The allocation for female entrepreneurs was above the minimum-targeted amount, which is 5.7 per cent of the total allocation of funds against the target level of 5 per cent.

Since the pandemic has disproportionately affected women entrepreneurs, a separate stimulus package needs to be introduced in support of women entrepreneurs, said Towfiqul.

In this backdrop the package should provide fiscal and monetary policy support, including a waiver from paying registration fees, VAT and electricity bills for a limited period, he added.

Towfiqul said that it is important to ensure speedy disbursement of the subsidised credit among eligible SMEs. Banks specialised in SME financing should be allocated more funds to disburse credit not only to their existing clients but also to new borrowers.

Budget should focus employment, not growth

The next budget for the fiscal year 2021-22 should focus on employment generation, ensuring health services to people and social safety net instead of making it a traditional growth-centric one, says CPD.

“GDP growth should not be the target of the budget. Instead of mega projects, the government should take projects that would create and increase employment opportunities,” said Professor Mustafizur Rahman, distinguished fellow of CPD.

In the present context of the pandemic, the government should focus on how to tackle the health risks giving importance to the health issues as the economic recovery will depend on this, said Mustafizur.

According to the think tank, the upcoming budget will also have to allocate resources in a way that would address the needs of both the immediate and the recovery phase.

In the immediate term, it will need to focus on mitigating health risks and ensuring food security through expanded safety nets, it said.

In the recovery phase, which should be pursued in parallel, the budget will have to make allocations and undertake measures considering the demands of entrepreneurs, enterprises, businesses and commerce, it added.

Meanwhile, the CPD also opined that GDP growth would not be meaningful if it does not create employment and bring changes in people's lives.

“There is growth but there are no qualitative changes in people's lives and livelihood. Therefore, this growth does not create meaning,” said CPD executive director Fahmida Khatun.

If the GDP growth does not create employment and remove disparity, it would not benefit people. So, the budget should focus on steps that would generate employment as well as ensure social protection, she added.

Public expenditure under the national budget for 2021-22 should highlight four areas, ensuring better health facilities for Covid patients, enhancing social safety net programmes for poor, new poor and marginalised people, raising allocations for employment-enhancing infrastructure development projects and SMEs and export-oriented industries for their recovery and thereby keeping the existing jobs, it added.