SMEs need 8 times more credit
The government announced a Tk20,000 crore stimulus for small and medium entrepreneurs. But there were allegations that small entrepreneurs did not get the loans due to the complex disbursement process
Highlights
- SMEs placed loan applications seeking around Tk800cr
- SME Foundation's disbursement target is only Tk100cr
- 11 banks, non-bank financial institutions handling disbursements
- Only one-third of the Tk100 fund disbursed as of May in FY21
- Some 166 entrepreneurs received loans amounting to Tk15.66cr
- Tk19.49cr sanctioned for 181 more, but disbursements still ongoing
- Another 351 to get Tk62.06cr in loans within this month
Small and medium enterprises, hit the hardest by Covid-19, are now flocking to banks to avail stimulus loans at a low interest rate.
To recover from the pandemic blues, they have placed loan applications seeking around Tk800 crore against the disbursement target of Tk100 crore, putting the SME Foundation that works for the welfare of small businesses in a spot of bother to pick from several thousand entrepreneurs for disbursal.
The non-profit foundation got such a big number of loan applications after openly enquiring 60-70 business associations in different sectors across the country about their financial needs.
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The SME Foundation is making disbursements through 11 banks and non-bank financial institutions as it does not have its own such system.
As of May in FY21, the banks have approved only one-third of the Tk100 fund for disbursal.
Some 166 entrepreneurs have received loans amounting to Tk15.66 crore, while Tk19.49 crore has been sanctioned for 181 more but disbursements have not finished yet. Another 351 will get loans amounting to Tk62.06 crore within this month.
After the Covid-19 hit last year, the government announced a Tk20,000 crore stimulus for small and medium entrepreneurs. But there were allegations that small entrepreneurs did not get the loans due to the complex disbursement process through banking channels.
Subsequently, the government took an initiative to engage non-governmental organisations in loan disbursements to the peripheral level.
On 17 January this year, the government approved a new package amounting to Tk1,500 crore for small traders, entrepreneurs and farmers.
The SME has got permission to disburse Tk300 crore from the package. In the fiscal 2020-21, it is disbursing Tk100 crore to small and medium entrepreneurs. In the next fiscal year, it will hand over the remaining Tk200 crore to them.
Besides, the Social Development Foundation, the Rural Poverty Alleviation Foundation, the Bangladesh Rural Development Board, The Bangladesh Small and Cottage Industries Corporation (BSCIC), and the Small Farmers Development Foundation, Joyeeta Foundation and the Bangladesh NGO Foundation have been tasked with implementing the stimulus package.
In a meeting with stakeholders before loan disbursements, SME entrepreneurs complained of facing complexities regarding collateral in availing a loan.
MirzaNurulGhaniShovon, president of National Association of Small & Cottage Industries of Bangladesh (NASCIB), said entrepreneurs are not facing any problem in getting loans under the stimulus package. This stimulus package will be very helpful for them at this pandemic time.
NazimHasanSattar, general manager of the SME Foundation, told The Business Standard, "Loan demand has strongly increased for small and medium businesses as they have been affected the most by the pandemic. But the loan demand we have got from 60-70 associations of different sectors in the country is much higher than the disbursement target."
SME sub-sectors, potential SME clusters, women and new entrepreneurs and those in backward areas, ethnic community, physically-challenged and transgender entrepreneurs in different parts of the country are getting priorities in getting loans.
Entrepreneurs can take out loans ranging between Tk1 and Tk75 lakh at 4% interest under the stimulus package with a maximum of 24-month repayment period based on the banker-customer relationship.
In the first phase of the stimulus distribution, rural and marginal entrepreneurs who have not received loans from the first stimulus package will get loans, and 25-30% of the total loan will be given to women entrepreneurs.
According to the SME Foundation sources, the light engineering sector has sought Tk80 crore in loans under the package, while women entrepreneurs have demanded Tk60 crore against Tk25-30 crore allocated for them.
According to loan disbursement data as of May, five out of 11 banks and non-bank financial institutions could not disburse any loan. Five banks, one financial institution have given loans amounting to Tk15.66 crore to 116 entrepreneurs.
Brac Bank has disbursed Tk13.03 out of Tk15.66 crore to 124 entrepreneurs. The bank has approved Tk2.53 crore for 29 more but could not disburse.
Nazim said, "Entrepreneurs who are very marginal and have never transacted with a bank but need a loan in this pandemic time are being given priority."
