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23 May, 2020 06:19:14 AM

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CMSMEs need financial support to recover

The Bangladesh Bank issued a guideline for banks to disburse at least 15 percent of the announced stimulus package among SMEs in rural areas
Anwar Faruq Talukder
CMSMEs need financial support to recover

Cottage, Micro, Small and Medium Enterprises (CMSMEs) are the largest segment of an economy in terms of number of employment they generate and contribution they make towards Gross Domestic Products (GDP). SMEs play an important role in the economic development of a country.

CMSMEs, like other businesses, are also vastly being affected by the coronavirus pandemic. Many owners of cottage, micro, small and medium sized enterprises (CMSMEs) are battling on multiple fronts in this time, including supply chain disruption, reduced local and overseas demand, workers who are sick or unable to get to work and customers that are changing purchasing priorities. Since each client situation is unique, they need different types of relief measures. These may be short-term payment deferrals for those that are unable to reach their shops, short terms working capital to medium-term options such as interest-only payments, and longer-term debt restructuring.

As the pandemic moves fast, many governments and central banks are ready to support businesses with new relief measures. These relief measures have been announced in Bangladesh, India, Malaysia, Singapore and Vietnam. Initially, assistance was given in the form that if the borrower including the owners of CMSMEs will fail to repay installments until June 30 this year, the banks will not consider borrowers as defaulters. But their accounts will continue to accrue interest during the period. Later, the central bank asked all banks and NBFIs to transfer the interest of April and May 2020 to block account. The Government of Bangladesh has announced a stimulus package of Tk. 20,000.00 crore for the affected cottage, micro, small and medium enterprises (CMSME). Under this stimulus package, Bangladesh Bank has issued different circulars mentioning that banks will provide loans from their own sources to eligible borrowers based on banker-customer relationship as working capital support.

To implement the declared stimulus package properly later, Bangladesh Bank has formed a revolving re-financing with a fund lay-out of Tk.10,000.00 crore to provide re-finance facilities to banks/FIs for providing working capital loan/investment facilities to CMSME Sector to defend potential disaster of coronavirus pandemic. It will help banks and NBFIs to get ready fund as refinance. The banks and NBFIs are advised to extend 10% of total outstanding of December 2019 to lend the affected CMSMEs. Bangladesh Bank will cover 4 percent of the 9 percent interest burden of the SMEs and export-oriented industries to help them recoup losses. Small businesses in rural areas will get subsidized loans of Tk 3,000 crore under the Tk 20,000 crore stimulus package announced by the government to support small and medium enterprises (SMEs) affected by Covid-19 pandemic.

The Bangladesh Bank issued a guideline for banks to disburse at least 15 percent of the announced stimulus package among SMEs in rural areas. Women entrepreneurs will get at least 5 percent of the package. Another Tk 3,000 crorer announced by Bangladesh Bank for small traders, professional though Micro Financing Intuitions (MFIs). It seems that the packages will help CMSMEs to come back into the work. But till date nobody can ensure when the normalcy will come back and people can start work in full swing. However, where people are struggling with their lives and living may come later. Meanwhile, the affected people need direct support from government/NGOs. Bangladesh government is trying the best to support the affected people.

However, bankers want guarantee against disbursed SME loan guarantee schemes in response to the crisis. Meanwhile, the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) has taken up steps to collect district-wise data of affected CMSMs to open a SME website. Recently, FBCCI declared that they will monitor the stimulus package implementation to the Covid-19 affected SMEs.

It seems that the packages will help CMSMEs to come back into the work. But till date, nobody can ensure when the normalcy will come back and people can start work in full swing. As there is no denying that the country is vastly dependent on the CMSME sectors, it must take all-out measure to support CMSMEs. If the government or Bangladesh Bank, commercials banks, NBFIs can ensure support by providing appropriate policy and loans for the CMSMEs, there would be a huge opportunity to come back earliest possible time.

The writer is a banker and economic analyst. E-mail: anwarfaruq@yahoo.com

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Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

Editor : M. Shamsur Rahman
Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

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