Experts urge structural reforms for easy CMSMEs loan disbursement

Structural reforms in the loan disbursement process, establishing a specialised SME bank, and policy reforms will pave the way for CMSMEs – the lifeline of the country's economy – to flourish, experts said at a discussion on Tuesday. 

SME Foundation and Dhaka Chamber of Commerce & Industry (DCCI) jointly organised the programme.  

DCCI President Rizwan Rahman in his opening remarks said the contribution of the cottage, micro, small, and medium enterprise (CMSME) sector in the GDP is only 25% whereas it is 35-60% in the Philippines, Vietnam, Sri Lanka, and China. 

According to a local study, overall income from the CMSME sector reduced to 66% in 2020 compared to that of 2019, and 76% of products remained unsold, he said. 

A DCCI study found that due to the coronavirus pandemic, 62% CMSMEs had to cut their manpower and 90% are continuing their businesses with less capacity. Some 73% of the stimulus packages have been distributed but most of the CMSMEs are still deprived of that fund. 

Rahman also said that medium enterprises have good relation with banks compared to small entrepreneurs because of a lack of documentation and confidence. 

A CMSME-friendly fund and easy access to a loan management system is the demand of time now, he added. If the Bangladesh Bank can give guidelines to banks that they have to disburse a specific amount of loan to the CMSMEs and then banks will have to comply with the instructions.   

Professor Dr Md Masudur Rahman, chairperson of the SME Foundation, said, "SMEs are the lifeline of our economy and during the pandemic, we were able to uphold this image to the policymakers."

According to the data of 2013, there was 78 lakh SMEs but at present, this number is more than 1 crore. In India and China, 60% of their GDP comes from SMEs. 

Dr Md Mafizur Rahman, managing director at the SME Foundation, said the foundation has disbursed about Tk122 crore in one and half months and this amount went to SMEs. 

"We cannot handle the money, we do not have that mandate as SME Foundation. We reiterate establishing a specialised SME bank. We requested all banks to give 50% of their loan to women entrepreneurs," he added.

Suman Chandra Saha, assistant general manager of SME Foundation presented the keynote paper. 

He said that the SME Foundation from its funds, under the credit whole selling programme, already disbursed Tk122 crore through the existing banking channel. 

Some 2,186 entrepreneurs from 40 districts got loans from this fund out of which 524 were women entrepreneurs, he said. 

NKA Mobin, FCS, FCA, senior vice-president of DCCI, said the SME Foundation and the Bangladesh Bank need to work jointly on policy reform issues. 

He also said that cash flow-based loans should be introduced as term loans, especially for the service sector. 

Rashedul Karim Munna, director at DCCI, called for redefining the definition of SME. 

"Banks should consider less documentation process for the SMEs," he said, urging for a specialised SME bank to safeguard the SMEs. 

Khairul Majid Mahmud, another director at DCCI, said CMSMEs sometimes cannot gather all necessary documents for getting loans due to lack of capacity. 

"Large businesses can manage funds from banks easily but small businesses cannot get it that easily. He also said women and men should be evaluated in an equal manner in terms of loan approval."

Saifuddowla Shamim, head of SME at IDLC Finance Limited, said SME entrepreneurs in the country are more than 80 lakh. 

"SMEs are the paymasters, they are good in refunding, so they should get priority," he added.