• Friday, Oct 02, 2020
  • Last Update : 12:21 am

Banks slow in lending stimulus fund for CMSME sector

  • Published at 10:10 pm July 20th, 2020
WEB_Cabinet-meeting-presided-over-by-Prime-Minister-Sheikh-Hasina-approves-the-draft-SME-Policy-2019-on-Monday-SYED-ZAKIR-HOSSAIN
Representational photo Syed Zakir Hossain/Dhaka Tribune

As of June 30, banks had disbursed only Tk250 crore in the sector out of the Tk20,000 crore stimulus package

Banks are lending slowly to businesses belonging to the cottage, micro, small and medium enterprise (CMSME) sector from Tk20,000 crore stimulus fund, although the Bangladesh Bank (BB) had asked scheduled banks to disburse the entire fund promptly.

As of June 30, banks had disbursed only Tk250 crore in the sector out of the Tk20,000 crore stimulus package, as revealed by the latest BB data. 

However, commercial bankers said the total figure of disbursed loans to the CMSME sector had increased in the current month.

Of the total Tk250 crore of disbursed loans, Shahjalal Islami Bank has disbursed Tk27 crore, City Bank has disbursed Tk26 crore and Brac Bank has disbursed Tk2 crore. 

Besides, Islami Bank Bangladesh, Mercantile Bank, Trust Bank, Agrani Bank, Sonali Bank and Bangladesh Krishi Bank have also lent loans to businesses under  the CMSME sector, it is learnt.

“A huge number of applications from the SME sector are now being processed for loan disbursement,” Islami Bank Deputy Managing Director Abu Reza Mohd. Yeahia told Dhaka Tribune.

Islami Bank had already received 1,000 applications seeking loans from the stimulus package, he added.

While BRAC Bank is considered to be the pioneer for SME lending in the country, it lent only Tk2 crore to the CMSME sector till June. 

Talking to Dhaka Tribune, BRAC Bank’s SME Banking head Syed Abdul Momen said loan disbursement to the SME sector had increased from this month.

“The management cost of SME loans is much higher than that of industrial loans. So, we have to disburse loans for the sector after much paperwork and checking,” he added.

“The slow disbursement was caused due to a number of strict conditions attached by the central bank. The central bank fixed only 20% of lending for the trading sector, while  most of our clients in the sector are traders,” he said further.

Momen said the implementation of a single digit lending rate from April was a big challenge for the bank as being the largely SME lender. It was very difficult to implement a 9% rate for SMEs , he added.

On April 13 this year, the BB in line with the government’s announcement 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, setting the interest rate ceiling at 9%.

Of the 9% interest, the government will bear 5% as subsidy and the remaining 4%  will be borne by borrowers.

Later, the central bank set up a Tk10,000 crore revolving refinancing scheme to help implement the Tk20,000 crore stimulus package.

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