Banks did not disburse even half the Tk 20,000 crore-stimulus fund for the cottage, micro, small and medium enterprises (CMSMEs) until now despite the central bank’s policy relaxation and deadline extensions.
As of December 3, banks disbursed about Tk 8,600 crore among 52,000 CMSMEs, according to the central bank’s latest data. Another Tk 1,700 crore of loans have been authorised but are yet to be disbursed.
The sector occupies an important position in the national economy, accounting for about 25 per cent of Bangladesh’s GDP, according to a recent report of IDLC Finance.
But the ongoing pandemic is forcing a majority of the small businesses to close down, it added.
To avert wholesale shuttering of CMSMEs, the government has announced loans at 4 per cent for them. The banks would charge the CMSMEs 9 per cent interest, but the government would be bearing 5 per cent of the interest rate.
The deadline for disbursing the CMSMEs’ bailout funds is December 31.
Disbursement of small loans typically takes longer than large loans, said BB Spokesperson Md. Serajul Islam.
Still, the central bank regularly asks banks to disburse the funds within this year and even held several meetings with banks that were going slow with the disbursement, he added.
For the smoother implementation of the stimulus funds, the BB in July announced a credit guarantee scheme (CGS) worth Tk 2,000 crore for the sector.
A CGS provides third-party credit risk mitigation to lenders through the absorption of a portion of the lender's losses on the loans made to SMEs in case of default, typically in return for a fee.
Banks will get 80 per cent coverage of a credit given to an individual or a company.
Not only CGS, but the central bank has also taken several initiatives including policy relaxation and deadline extension to push the disbursement process of banks.
Then on November 27, the central bank enhanced the loan limit to 35 per cent for the trade-based CMSMEs from 20 per cent considering the high demand for loans from that segment.
And yet, the much-needed funds are eluding a large portion of the CMSMEs.
At most, eight banks have lent out a good portion of the loans from the funds.
Until December 3, Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank and BRAC Bank have completed their disbursement process from the stimulus funds.
Eastern Bank has disbursed at 98 per cent of the amount allocated, One Bank 90 per cent and Islami Bank Bangladesh 80 per cent.
Prime Bank has disbursed Tk 227 crore, which is 90.8 per cent of the amount assigned by the BB, said Faisal Rahman, its deputy managing director.
“We have already completed our disbursement process as the bank always emphasises on the small and medium businesses,” he added.
State-run Agrani disbursed about Tk 403 crore, which is 45 per cent of its allocation, among 4,976 clients as of December 15, said Mohammad Shams-Ul Islam, its managing director.
“Banks give funds to the CMSME sector after much paperwork and checking, so the disbursement has been slow.”
But the state-run bank is confident of completing its disbursement within the deadline, he added.
Dhaka Bank managed to disburse just 30 per cent of its target, said its MD EmranulHaq.
“Credit risk analysis is very important for approving loans amid the ongoing pandemic, which is a time-consuming exercise,” he said, adding that the bank has approved loans amounting to 43 per cent of its allotted sum.
The 9 per cent ceiling for lending is the major reason behind the slow disbursement of the sector, said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.
“Where the interest rate for lending is up to 25 per cent in microfinance, it is only 9 per cent in the case of banks, which is not profitable for banks,” said Mansur, also the chairman of BRAC Bank, whose main focus is the SME sector.
The operating cost of a bank especially for SME loan disbursement is much higher, he said, adding that the lenders do not want to take the risk by lending at the 9 per cent rate.
