Cottage and micro enterprises should be separately grouped and targeted apart from Small and Medium enterprises so that their access to the stimulus packages can be increased, a top Bangladesh Bank official has said.
General Manager (SME & Special Programmes Department), Bangladesh Bank Husne Ara Shikha came up with the observation at a virtual dialogue on Sunday.Business Initiative Leading Development (BUILD) organized the virtual dialogue styled: “Redesigning a 2nd Stimulus Package for Economic Recovery of CMSMEs.”
She said that at present, 6 percent of the stimulus package has gone to cottage and micro enterprises, while women entrepreneurs have received 6 percent of the SP.
The Bangladesh Bank is working to support employment generation by allocating funds to organizations like Karmasangsthan Bank, Prabashi Kalyan Bank, and so on, she added.
As cottage and micro are informal sector, these are difficult to reach through banking channels, while microfinance institutions are not willing to take loan from FSP as it is not profitable to them.
Regulatory simplification as well as strengthening work area of successful institutions should get more emphasis. Since working capital infrastructure is yet to be built properly. It will be convenient to provide CMSMEs term loans for 3 years.
In April 2021, Bangladesh Bank issued a circular to guide banks to allocate 1 percent of their profit to their CSR funds. Monitoring is essential to implement this circular. Good governance and digital inclusion are essential for success of the stimulus package.Abul Kasem Khan, Chairperson of BUILD presided over and moderated the session.
Dr. M Masrur Reaz, Chairman, Policy Exchange of Bangladesh delivered a presentation on “Redesigning Stimulus Package for Economic Recovery of CMSMEs”.
Highlighting global and national impact of covid, he mentioned that in Bangladesh GDP growth decelerated from 8 percent in FY19 to, while the RMG sector has faced cancellation order worth $3.2bn, leading to loss of jobs of 24,000 workers between April and June 2020.
There has been a 39 percent drop in Domestic and FDI proposals in FY20, while import of Capital Machinery & Disbursement of Industrial Loans Dropped.
He mentioned that, 3,046 big enterprises borrowed BDT 25,411 crore as working capital. Private sector credit growth stood at 8.2 percent in November, which is the lowest in recent years.
Low consumer demand has had a detrimental impact on small businesses, who are suffering from cash crunch and low revenues.
He noted 66 percent overall decrease in revenue in the SME sector. 39 percent of the SMEs have cut down their salary costs by 25-20 percent, which hints at layoff of employees to keep afloat.
He mentioned the objectives of the project which include assessing the current state of SMEs, Investments, and Employment after the second wave; evaluating the readiness and recovery of the economy post-Covid with particular focus on Employment and Business Dynamism; and designing more effective support measures.
Rizwan Rahman, DCCI President suggested that definition of SMEs needs to be clarified and national database for SMEs should be set up. Cash flow based financial transaction and reduction of documentation costs should be reduced.
Dr. Md. Mafizur Rahman, Managing Director, SME Foundation urged that bank-client relations criteria needs to be readdressed to avail FSP. Proper coordination among focal point of a Bank & local branches is required.
Women entrepreneurs are mostly deprived, as they received 5 percent of the first stimulus package. 30 percent FSP should be allocated for WEs in second FSP, he said.
Salekeen Ibrahim, Head of SME, Eastern Bank Ltd observed that banks have to manage Credit Risk, for which the central bank has announced Credit Guarantee Scheme.
Expansion of Credit Guarantee Scheme is necessary to ensure Accountability of Banks to disburse FSP for SMEs. Criteria of documentation are set by BB to ensure compliance. Bangladesh Bank can take initiative to ensure ease of documentation, he also said.
Indrajit Sur, Head of Emerging Corporate, BRAC Bank Ltd noted that the mindset of bankers should be favorable to assisting the SMEs is must. Business associations should take initiative to form One Stop Service to train their members to make them bankable.
Monowara Hakim, President, Chittagong Women Chamber of Commerce & Industry highlighted the deprivation of WEs in availing FSP. Bankers should be trained to deal with WEs with utmost care.
Akhil Ranjan Tarafder, General Manager, BSCIC identified a certain lack of awareness about BB circular among scheduled bankers.
Bankers should consider this crtical situation and make the process simplified. The amount of allocation of stimulus package to BSCIC, PKSF and so on to disburse among SMEs should be increased, he added.
Mohammad Nazmul Avi Hossain - Programme Officer, ILO, mentioned that financial stimulus package should be treated at package of multiple purpose.
Mr. Mazedul Islam, Development Coordination Officer, UNRCO recommended developing gender-disaggregated database to address to destination of FSP. The banking procedures should be simplified. Micro financial institutions should be considered to disburse FSP. Multi Stakeholders Taskforce is required to ensure Loan monitoring.
Ferdaus Ara Begum, CEO, BUILD pledged that BUILD will take initiative to create awareness on Bangladesh Bank's circular among SMEs, and work with PPD Platform for furthering policy simplification.
BUILD and SME foundation will work for Digital Dynamic Database for SMEs. BUILD will send all the recommendations to Bangladesh Bank, she said further.