The rapid disbursement of government stimulus packages among small, micro, small and medium-sized enterprises (CMSMEs) faces bottlenecks, starting with the complexity of defining these entities, speakers said yesterday.
A lack of required documents as well as inconsistencies and inconsistencies in submitted documents, complicated loan disbursement process, collateral issues, absence of bank account and poor relationship and coordination between financial institutions and contractors also hinder the process, they said.
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In Bangladesh, CMSMEs account for 80% of industrial employment and 45% of value addition in manufacturing, said Rizwan Rahman, President of the Dhaka Chamber of Commerce and Industry (DCCI).
“But the capacity and potential of this sector could not be fully exploited due to lack of financial and political support.”
He spoke at a virtual workshop on “Procedures and Preparation for Obtaining a Bank Recovery Plan Loan” hosted by the DCCI, according to a press release.
Over 100 DCCI members attended the workshop for a better understanding of readily available stimulus loans.
The government, in two phases, has declared stimulus packages amounting to Tk 40,000 crore to help these entities deal with the coronavirus pandemic and revive the economy, Rahman said.
But bottlenecks, including the lack of a database, have sometimes made it difficult for entrepreneurs to get loans, he said, calling for speeding up loan disbursements.
“Disbursement of stimulus loans is quite good in urban areas but not up to standard in remote areas,” said Jaker Hossain, Managing Director of SME and Special Programs Department at Bangladesh Bank.
In the first phase, Tk 15,500 crore was disbursed from the stimulus package while, in the second phase, Tk 6,217 crore was distributed as of February 9.
Hossain thinks there might be misconceptions among bankers and contractors on the ground that have slowed down the disbursement process.
Stating that banks are not hesitant to provide loans and are now actively seeking customers, Hossain urged entrepreneurs to keep proper documents and cooperate with banks to get loans quickly.
He also asked bankers not to harass loan applicants.
Regarding the definition, the BB official said that the entities will be redefined in the next new industrial policy.
“We need to promote real SMEs and for that we need to change our mindset to facilitate real SMEs.”
An SME database is very essential for the distribution of loans, said Md Rafiqul Islam, Executive Vice President of Islami Bank Bangladesh Ltd, in a keynote address.
Small businesses make up 90% of businesses while formal SMEs contribute up to 40% to gross domestic product in emerging economies, he said.
To facilitate the provision of stimulus loans, entrepreneurs must first be classified in the right segment, he said, adding that the central bank’s policies were very flexible and adequate.
In line with central bank guidelines, 30% of loans from banks and financial institutions are dedicated to small entities, Islam said.
He also pointed out that a banker has to follow nearly 86 rules and regulations in day-to-day banking activities.
A minimum set of documents is needed for loans because banks need to ensure financial transparency, he said, asking loan seekers to maintain consistency and consistency in the documents they submit.
Islam said digitizing all services would help the process to a great extent. “Banks are ready and very willing to lend, but the number of offers is not that great.”