In a bid to protect the local micro, small, and medium enterprises (MSME) from the severe economic setback created by the coronavirus pandemic, Dhaka Chamber of Commerce & Industry (DCCI) has urged the government to come forward with some short and mid-term fiscal and non-fiscal recovery policy plans to support and rescue MSMEs.
DCCI made the request in a press release signed by DCCI Secretary Md Joynal Abedin on Friday.
DCCI lauded the timely leadership of Prime Minister Sheikh Hasina for taking pro-economic decisions during this unprecedented crisis and creating a Tk5000 crore fund for export-oriented industries to support the salary and wages of their workforce. They requested a similar approach for saving the MSMEs.
The coronavirus pandemic has substantially impacted MSMEs like trading businesses, transports, hotels, restaurants, grocery stores, and the informal sector. Many of them have been passing an anxious time due to limited trade and shortage of funds to maintain business operations and paying the salary of the employees and workers, which can cause unemployment.
DCCI has requested the government to create a 3-year long emergency fund with 1% interest to support the financially stressed local MSMEs and informal sector for paying their workers’ salaries. They proposed that MSMEs with a turnover of Tk1 crore can get loans with 1% interest and 2% interest for MSMEs over 1 crore turnover.
Factories located in the BSCIC industrial parks across the country also need to be brought under this emergency fund for paying salaries and labour wages. MSMEs should be allowed a one year grace period for this loan.
DCCI remarked that converting accounts receivable into cash will be very difficult for MSMEs as all businesses are undergoing similar adversity. During this uncertain business times, MSMEs will have liquidity shortages.
In this connection, DCCI has proposed the waiver of bank loan interests for impacted MSMEs for 1 year.
Moreover, to ensure funding and easy access to financing for MSMEs, they have also proposed to convert the existing Re-financing Scheme into Pre-Financing Scheme with a low-interest rate and by relaxing collateral requirements.
Considering the direness of the situation, Bangladesh Bank can provide direct liquidity support to commercial banks, said DCCI.
The additional liquidity to be injected by Bangladesh Bank under the direct liquidity support window needs to be tagged with Pre-financing Scheme to mobilize required funding to local businesses since downward business trend limits general banking business cycles.
Moreover, bank guarantee requirements of limited liability companies registered under the Companies Act can be exempted for the next 6 months.
To support the MSMEs with an adequate fund at a lower cost and waive interest of impacted businesses for the next six months, it has to be ensured that there is sufficient liquidity in the banking system.
DCCI praised Bangladesh Bank for taking precautionary measures including reducing cash reserve ratio (CRR) and policy rate to ensure liquidity in banks as well as the business-friendly moves like EDF repayment time and loan repayment time extension initiated earlier.
In addition to these measures, DCCI also recommended reducing the statutory liquidity ratio (SLR) for the next six months as well as lowering of the advance deposit ratio (ADR).
In order to reduce the tax burden of MSMEs and allowing cash flow in hand to some extent, DCCI recommended deferring submission of income tax for the fiscal year 2019-20 of impacted MSMEs and entrepreneurs. Impacted MSMEs are to be facilitated to pay the outstanding income tax in three instalments adjusting with tax returns applicable for the subsequent three years without any penalty.
Most of the MSMEs rent their office space, according to DCCI. To reduce their burden, DCCI recommend deferring the payment of office and manufacturing premises rent for the next six months in government-run plots like in BSCIC and EPZ.
To support the smooth operations of MSMEs across the country, value-added tax (VAT) on commercial rent, electricity, gas, and water bills, and license renewal fees can be withdrawn for the next 6 months.
DCCI said job loss victims should be brought under social safety net program of the government.
Considering the current state of standstill and limited port operations, port demurrage and bank charges for MSMEs engaged in export-oriented manufacturing activities and import businesses should also be waived.
Since the coronavirus pandemic affects Bangladesh’s local export business to the European Union (EU) and the United States (US), and the overall global trading system, DCCI has urged the Government to negotiate with relevant counterparts to restore the GSP facility in the US the market and gain GSP plus facilities for EU market in the near future.
According to DCCI, consideration and implementation of these timely recommendations will enable MSMEs to sustain in this difficult period, and overcome the crisis and revive the economic growth in the near future.
DCCI also requested the government to create a fund for public health safety.
