In such a situation, small-scale entrepreneurs with no links with the banks but hit hard by the pandemic will suffer hugely
The majority of small and medium entrepreneurs, including women, fear that they may be unable to avail loans from the government-declared stimulus package as a measure toward recovering the Covid-19 fallout.
The fear is linked to the fact that the commercial banks will distribute the fund depending on bank-client relations.
In such a situation, small-scale entrepreneurs with no links with the banks but hit hard by the pandemic will suffer hugely, they fear.
Mirza Nurul Ghani Shovon, president of the National Association of Small Cottage Industries of Bangladesh (NASCIB), noted that the Bangladesh Bank had instructed all commercial banks to disburse the loans under the stimulus package but the banks were yet to start the process.
Funding from the stimulus package would depend on existing relations between banks and SMEs, said the president, adding that many small-scale entrepreneurs, on the other hand, were not used to maintaining relations with banks at all.
At the marginal level, there were some entrepreneurs who were not bankable, he added.
“For these reasons, many SMEs will not get any benefit from the government incentives,” Shovon said.
Moreover, because of the uncooperative behavior of bank officials, it would be a challenging task for the entrepreneurs to avail the government assistance, the NASCIB president said. He added that most of the time banks were more willing to fund their existing clients rather than others who deserved it most.
Shovon urged the government to disburse the stimulus fund through the Bangladesh Small and Cottage Industries Corporation (BSCIC) and the SME Foundation together with several banks.
In that way, it will be more effective in reaching the small entrepreneurs struggling for survival, he said.
The government announced a bailout package of Tk20,000 crore for cottage, micro, small and medium enterprises (CMSMEs) to ensure working capital at low interest rates. The disbursal of the loans, the government said at the time, would be based on bank-client relations.
Speaking to Dhaka Tribune, Syed Mahbubur Rahman, managing director of Mutual Trust Bank, said, “We have begun the process of disbursing the loan under the stimulus package,”
“However, banks are still skeptical over disbursing the loan as economic and business institutions have not yet fully opened up”, he added.
He hoped that the scene would change and the flow of loan lending would also be increased.
CPD Executive Director Dr Fahmida Khatun said if different SME promoting bodies, including the Federation of Bangladesh Chambers of Commerce and Industries, the NASCIB, the SME Foundation and the Bangladesh Small and Cottage Industries Corporation helped micro entrepreneurs to communicate with banks, they could avail the loan.
“As banks are reluctant to lend to new entrepreneurs, these bodies can help the SMEs in preparing documents for getting loans, especially in these times of crisis”, she added.
Struggling SMEs desperate for loans
Taofiqunnessa Lucky, owner of the small enterprise Shilpa Shaily Boutiques and tailoring in Dhaka, has had to keep her business shut for the last three months due to the coronavirus lockdown.
Now she has nine regular employees, with an additional 40 people involved with her factory from across the country.
As her business remains closed, she has suffered from a liquidity crisis in trying to pay her employees’ salaries and the factory's utility bills.
Right now Lucky needs bank loans to handle her business. Unfortunately, she is not eligible to avail the government’s stimulus package as she did not maintain relations with banks. Since 1993, she has been running the business, begun with a small investment of her own.
Talking to Dhaka Tribune, Lucky said, “This is the first time I am in this crisis, struggling for the survival of my business.
“Marking the occasions of Pahela Baishakh and Eid-ul-Fitr, I have a number of collections but none of them have been sold. And here a large part of my total capital is stuck”, she lamented.
She said, “It is really pathetic that the authorities set conditions for the SMEs in terms of getting loans, whereas we are all working under the same platform”.
Like Lucky, Roksana Akter, entrepreneur of Mini Garments, a baby items shop of Narsingdi district, said her business had been totally destroyed by the ongoing coronavirus pandemic.
“Due to the current lockdown my business, among others, has been hit the hardest as I am totally unable to maintain liquidity and operational activities”, she said, and added that she had been trying for a loan from banks but did not get a good response.
Md Salauddin Mahmud, CEO of Kahinoor Agro Chemicals of Dhamrai area, claimed bank officials were not interested in dealing with new clients in the ongoing situation.
He said the process of getting current stimulus packages that are applicable through banks would be very complex and time consuming. “Despite my having all positive records of transactions, banks are unwilling to give me loans”, he claimed.
Another entrepreneur, Khandaker Aliya Sultana from Naogaon, said she was yet to know whether she would be able to get a loan or not.
“When I contact officials of different banks, they are saying different things. Some say I will get a loan, some say I will not”, she said.
“Actually we entrepreneurs really do not know how and when we will be able to get loans as bank officials are very unfriendly towards us on the issue”, she added.