As the cottage, micro, small and medium enterprises (CMSME) were going through a cash crunch due to the Covid pandemic, trade leaders and experts on Wednesday urged policymakers to simplify documentation process of banks for expediting disbursement of stimulus funds offered for the sector.
They also urged to engage organizations such as BSCIC, SME Foundation and PKSF to help rural entrepreneurs get the stimulus.
Trade leaders, bankers and sector people made the call at a virtual dialogue on “CMSME’s Access to Finance and the Way forward” organized by the Dhaka Chamber of Commerce and Industry (DCCI).
CMSME entrepreneurs were yet to get the benefit of the announced stimulus package, while existing complex documentation process and lengthy procedures were some of the reasons behind this slow disbursement, said the discussants.
Small and medium businesses struggled to get loans as only 28% of CMSMEs had access to finance compared to 44% large enterprises’ access to finance, said Akhil Ranjan Tarafder, General Manager of BSCIC.
Proper documentation process, collateral, lengthy process and banks’ unwillingness were some of the problems of slow loan disbursement, he said.
“The country’s CMSME sector represents 13 million business entities in Bangladesh and generates about 35.49% employment in the country. Covid 19-led crisis is affecting the sector adversely,” DCCI President Shams Mahmud said.
For the revival, the government had announced a stimulus of Tk20,000 crore, he said. But entrepreneurs were facing challenges in getting loans from the package due to documentation complexity, added Shams.
As per the DCCI findings, most of the entrepreneurs are facing challenges in fulfilling all requirements of banks and 59% CMSME find loan disbursement process complex.
Shams also said that non-banking channels could be useful for disbursing loans to CMSME. Moreover, the definition of SME needed to be unified with other related policies, the business leader suggested.
The discussants also opined that the announced package was not enough considering the size of business entities in CMSME sector.
Anwar Faruque Talukder, EVP, Dutch Bangla Bank said demand and supply side constraints were the bottlenecks for the market’s revival.
“The package of Tk20,000 crore is for three-year term, and thus its effective amount will be Tk60,000 crore,” Abu Farah Md. Naser, Executive Director, Bangladesh Bank said.
He said the risks of loan classification were very low when it came to handling small entrepreneurs, He said the credit guarantee scheme would ease the access to finance specially for the CMSME.
Bangladesh Bank would consider whether banks’ lending as working capital could be treated as term loan, he added