SMEs disappointed at banks for skimping on loans amid pandemic

Top management of small and medium enterprises (SMEs) have expressed their dissatisfaction at banks for not providing loans amid the pandemic to entrepreneurs despite their default loan rate being only 1%.

Representatives of SMEs made the remarks on Sunday during a meeting at the Finance Division, titled “Ensure Speedy Disbursement of Incentive Package Funds to the Country’s Covid-19-affected Small Businesses.”

The meeting was presided over by Finance Division (Macroeconomic) Additional Secretary Dr Md Azizul Alam. Senior officials of the SME Foundation and five other SME enterprises including Joyeeta Foundation also attended the meeting. Besides, officials of the Bangladesh Bank were also present.

After the meeting, Md Shafiqul Islam, managing director of SME Foundation, said the banks are providing only 4% Covid-19 incentive package loan to SME women entrepreneurs, but that is supposed to be 15% of the total package provided by a bank.

He also said the Finance Division was immediately going to arrange a meeting with the senior officials of banks and financial institutions regarding non disbursement loans to SME entrepreneurs.

At the meeting, it was also discussed that banks are reluctant to disburse funds to the SME entrepreneurs involved in trade and service sectors because the stimulus package does not include such.

Banks disbursed only Tk206 crore to SMEs whereas SME entrepreneurs applied for loans worth Tk518 crore till last July, according to the Bangladesh Bank.

On April 13, the central bank issued a circular announcing an incentive package of Tk20,000 crore to ensure working capital supply to SMEs affected by Covid-19. The government is providing subsidies of 5% of the 9% interest on SME loans. The remaining 4% is now paid by the borrower.

The Finance Division and the central bank have so far announced 21 stimulus packages worth Tk121,000 crore, which is 4.34% of the GDP.

According to the Bangladesh Bureau of Statistics (BBS), the country is now home to about 7.8 million enterprises of all sizes, of which a staggering 6.8 million are cottage enterprises.

The second largest group is SMEs with over 866,000 small and medium-sized firms, making up just a little over 11% of the total number of companies.

The SME sector generates 30% of the total employment in the country as well. Small enterprises account for 27% while medium enterprises add the remaining 3%.

Around 23,000 small enterprises and around 3,000 medium enterprises are involved in exports, either directly or indirectly, according to BBS data.