Most cottage, micro, small and medium enterprises (CMSMEs) hit hard by the Corona pandemic have not got the benefit of stimulus package as bank loans linked to collateral.
The sector leaders and economic analysts made the observation on Wednesday at a virtual policy dialogue on ‘Post-Pandemic Status of CMSMEs and Effectiveness of Stimulus Packages.’Instead of collateral-based loans, they also suggested for cash flow-based bank loans to help CMSMEs overcome the tough situation created by the ongoing Covid-19 crisis.
Citizen’s Platform for SDGs, Bangladesh and Business Initiative Leading Development (BUILD) jointly organised the event.
“Many CMSMEs in Bangladesh are informal which are not registered under any systems. They also don’t maintain any financial records,” BUILD Chairperson Abul Kasem Khan remarked while presenting the keynote paper at the event.
“These CMSMEs are highly unlikely to benefit from the newly implemented Tk 200 billion credit Guarantee Scheme (CGS) announced by the government. We need to devise strategy to bring them into this system,” he added.
Out of Tk 200 billion CGS to pump in working capital to SMSMEs Tk 41.20 billion or 20.5 percent was disbursed by banks up to August and the rest money has to be disbursed by next month.
Aggressive implementation strategy needs to be ensured to ramp up the slow loan disbursement against these enterprises, the BUILD chief said.A BUILD survey jointly conducted with United Nations Industrial Development Organisation (UNIDO) suggests that 50 percent cottage and micro industries, and 32 medium enterprises SMEs had to borrow from MFIs to overcome cash crunch due to Covid-19.
The dialogue was told that CMSMEs’ sales came down to 35 percent because of the pandemic.
The BUILD-UNIDO survey reveals that 75 percent small and micro enterprises are in risk of shutdown of business or part of operation within three months. The risk is 58 percent among SMEs.
48 percent small and micro enterprises and 30 percent SMEs fear 50 percent revenue fall in the current fiscal year, while 64 percent small and micro enterprises and 38 percent SMEs think that getting back their businesses to normal will take over six months time, the survey shows.
BSCIC,SME Foundation & PKSF have to extend more support to CMS both in urban & rural entrepreneurs in marginal areas for speedy loan disbursement, speakers at the dialogue suggested.
It needs to bring the unbanked entrepreneurs in the banking channel, they said adding that Banks may give loans to those MSMEs who do not have any bank account upon recommendation from respective trade bodies.
Allowing CMSMEs to pay VAT,Tax and all utility bills through equal installments in next 6 or 12 months for sustaining their businesses can also pay off.
Government needs to source the alternative financing rather than Banks and should focus on lessening cost of doing business, according to economic analysts.
Speaking at the dialogue, Industries Minister Nurul Majid Humayun said: “the government has taken many steps to help affected small and micro industries. Even though we could not reach the expected level, we’ve the good will for doing so.”
Admitting that CMSMEs have difficulties in taking bank loans, he also felt the need for more easing of bank loans procedure for the segment.
He also pointed out that medium enterprises get the most benefits from bank loans meant for CMSMEs taking the advantage of definition problem of different small industries. The minister also called for a change in the viewpoints of both the banks and the entrepreneurs.