SMEs hopeful about recovering with stimulus loans

Small and Medium Enterprises (SMEs) are hoping to bounce back from the adverse effects of Covid-19 this time around with loans from the stimulus packages.

After a fresh shock created by the pandemic, the term “new normal” is gaining space to support the comeback of SMEs and two consecutive incentives — Tk20,000 crore in 2020 and Tk300 crore announced this year by the government.

On April 13 last year, the central bank issued guidelines on providing working capital facilities amounting to Tk20,000 crore to the cottage, micro, small and medium enterprise (CMSME) sector affected by the coronavirus pandemic.

But banks and non-bank financial institutions (NBFIs) had been lending slowly to businesses belonging to the sector.

However, since the time has been extended till June 30 of this year, industry insiders hope that it will be possible to disburse the entire amount within this extended period.

According to the SME Foundation, a significant portion of the first set of incentives has already been disbursed.

Mafizur Rahman, managing director of SME Foundation, said that about 74-75% of the incentives have already been disbursed and he hopes that the rest will be disbursed by June.

“Entrepreneurs faced some problems in getting loans from the first incentive package, one of which was that most of these people were unbanked,” he explained.

There are some policies for receiving money from the bank; several entrepreneurs could not fulfil these policies and that is why there have been some problems, Rahman added.

Moreover, many of the SME entrepreneurs had no experience in taking loans from banks. Several did not even have an account for their business transactions conducted in the past year.

Unawareness was also a major barrier to receiving incentives, he added.

But the situation has improved in the last few months, according to Rahman.

“We are telling them since the bank will pay loans, to collect it, they have to submit all the required documents. We are cooperating with them to get the necessary papers updated, and we are always monitoring the situation. SME Foundation staff is in constant touch with the banks and with the cluster body,” he added.

Mafizur Rahman also said that less than 20% of loans were disbursed by last October, whereas loan disbursement has reached around 75% till now.

This means that financial inclusion in the SME sector is increasing, he said.

Previously on April 27 this year, the SME Foundation declared that it will provide loans of Tk300 crore to CMSMEs under the government's second phase incentive package for expediting Bangladesh's economic recovery amid the Covid-19 pandemic.

The foundation, in a statement, said that they will provide Tk100 crore of this in the current fiscal year and another Tk200 crore in the 2021-22 fiscal year.

And they said this package would have an exclusive focus on disbursing loans to women entrepreneurs.

In the first incentive package, women received only 6% of the total loans. But this time, the foundation has given priority to women and set a target of at least 30% loan disbursement for them from the second incentive package, said Rahman.

Rezbin Hafiz, a leather entrepreneur and owner of People’s Footwear, said that she has applied for a loan from the second incentive package and hopes to get it on time.

“Many did not get a loan at the beginning when they announced the first package. There were some problems with the banks’ policies. But this time, everyone has become aware and is applying properly,” she said.

Monira Begum, an entrepreneur from Rangpur and owner of Shataranji Palli Rangpur, said that her business has suffered a lot because of Covid-19.

She has applied for the incentive through Prime Bank to pay the salaries of her employees, utility bills, etc.

Esrat Jahan Chowdhury, a jute entrepreneur and owner of Tulika, said that she has not applied yet but will do so soon.

Serajul Islam, the spokesperson of Bangladesh Bank, said that about Tk15,000 crore — more than 75% — of the loan from the first package has been disbursed so far.

“Banks have their policy on lending. They have to abide by those principles because they will have to repay the debt again. Many entrepreneurs did not have the required paperwork, so at first, loan disbursal was slow,” he added.

According to the International Finance Corporation, contributing 25% to the country’s GDP, the SME sector employs 20.3 million Bangladeshis — around 20% of the country’s adult population.