The Bangladesh Bank has rolled out a new initiative for stimulus disbursement to cottage, micro, small and medium enterprises (CMSME) to cushion the virus fallout.
Under the new initiative, in addition to working capital, cottage, micro and small (CMS) enterprises will also receive a credit guarantee scheme for term loans.
This will make banks interested in lending to CMS enterprises without collateral and support the timely implementation of the stimulus package.
On 13 April last year, the government announced a Tk20,000 crore stimulus package for CMSMEs. But by end-December, only around half of the package had been disbursed.
Since banks failed to disburse the loan on time, the central bank announced several extensions, finally fixing March 2021 for the stimulus disbursement.
According to the credit guarantee scheme guideline for CMS enterprises, issued on 27 July last year, although many micro and small ventures are able to repay their loans, banks are reluctant to lend to them without collateral.
To mitigate this issue, a credit guarantee scheme has been introduced for CMSME ventures to facilitate bank loans from the stimulus. According to this scheme, the central bank will repay the loans in case any CMS enterprises are unable to repay the loans on time, or if the repayment falls into uncertainty.
Banks do not have to maintain provisions for such loans as the central bank guarantees the repayment. The Bangladesh Bank now hopes that banks will be interested in providing loans to CMS enterprises without collateral, since they longer have to worry about losses, nor about maintaining provisions.
But only new loans will qualify for the guarantee scheme. India has taken similar steps to counteract the pandemic fallout.
CMS enterprises will be able to avail Tk2 lakh-Tk50 lakh from the stimulus package, either for working capital or as term loans.
According to the central bank's Monday circular regarding the credit guarantee scheme, this latest decision was made taking into consideration the impact of the virus on CMSMEs and the demand for short-term loans in the cottage, micro and small sector.
The deadline for banks to apply for the guarantee scheme has been extended to the first 15 days of each month, said the circular.