The SME Foundation will extend Tk100 crore in loans to peripheral small entrepreneurs in the next one month to strengthen their financial capacity amid the coronavirus pandemic.
Entrepreneurs of 40 cottage, micro, small and medium enterprise (CMSME) clusters across the country will get these loans at an interest rate of 4%.
Entrepreneurs of a cluster, first time stimulus seekers, prioritised SME sub-sectors, women entrepreneurs, and differently abled and third gender people will get preference for the low-cost borrowing package.
Women entrepreneurs alone will account for 25-30% of the total stimulus loans. The lowest limit of the loan is Tk1 lakh while the highest ceiling is Tk75 lakh.
Borrowers can repay the loan in maximum 24 monthly instalments, depending on the bank-client relationship.
Top five entrepreneurs will be able to qualify for group loans, also subject to bank-client relationships.
Nazim Hasan Sattar, general manager of the SME Foundation, told The Business Standard that the financial support to peripheral entrepreneurs would have a positive impact on the rural economy.
After the Covid-19 outbreak last year, the government announced a Tk20,000 stimulus for small and medium entrepreneurs. But there were allegations that small entrepreneurs did not get the loans due to the complex disbursement process through banking channels.
Subsequently, the government took an initiative to engage non-governmental organizations in loan disbursement to the peripheral level. On January 17 this year, the government approved a new package amounting to Tk1,500 crore for small traders, entrepreneurs and farmers.
The SME Foundation, the Social Development Foundation, the Rural Poverty Alleviation Foundation and the Bangladesh Rural Development Board have each got a Tk300 crore allocation for disbursement and implementation of the incentive.
The Bangladesh Small and Cottage Industries Corporation (BSCIC), and the Small Farmers Development Foundation have got Tk100 crore each, and Joyeeta Foundation and the Bangladesh NGO Foundation have been given Tk50 crore each.
Instead of disbursement through NGOs, the SME Foundation opts for loan disbursement through traditional banking channels.
The foundation has already entered into agreements with nine banks and two financial institutions and has designated clusters for them. The foundation said it would sign similar agreements with six more banks.
The loans will be sanctioned by the concerned banks after submission of loan applications along with the required documents. Entrepreneurs think the complex lending process will affect loan disbursements this time too.
Nazim Hasan Sattar, however, said loan disbursements through banking channels would not face any issues.
"Because we will reach out to the entrepreneurs and look after the borrowing process. Besides, loans of up to Tk25 lakh will be collateral-free," he noted.
Of the Tk300 crore allocation, the foundation has got Tk100 crore this year and will get the remaining Tk200 crore in the next fiscal year.
Who will qualify for the loans?
The foundation will provide loans only to entrepreneurs who have been under its supervision.
The SME Foundation has 177 clusters of different industries across the country. Though 40 clusters in more than 20 districts have been selected for the incentive, the foundation says all the clusters will gradually be brought under the government incentive program.
This phase of incentives takes into account the intensity of the pandemic devastation and the need for cash for recovery.
Entrepreneurs who will get loans in this phase will not qualify for loans in the next steps.
The loan recipient industries in this phase are: leather and leather goods manufacturing, cricket bat making, hosiery, bandage and gauze manufacturing, food processing, jute garments, the agar-perfume industry, textile industry, and handicrafts.
Also recipients will be light engineering, plastics, handloom, the printing industry, electrical products, small garments cluster, garment industry of Keraniganj, Jamdani cluster, and the Shataranji and Nakshikantha clusters.