The government has announced several stimulus packages to support industries, financial and farm sectors and vulnerable groups to help the economy rebound during this challenging time.
Business Initiative Leading Development (BUILD), a research and advocacy organisation, has come up with several recommendations for the regulators and policymakers, from the lenders' and borrowers' perspectives, to overcome the immediate effects and aftermath of Covid-19.
Prime Minister Sheikh Hasina announced the stimulus package of around Tk1 trillion to support the private sector of which about 23 percent is government incentives. The target of the package is to make sure that the private sector sustains its business and investment amid Covid-19.
The package includes loans, incentives and subsidies; most of which will be provided by the banks, said BUILD in a statement issued on Saturday.
The government announced stimulus packages of Tk30,000crore to provide working capital to the affected large industrial and service sectors. But it will only be provided based on bank-client relations, says BUILD. "And it may not be enough."
"Banks can consider a demand-based formula to provide loan facilities to the affected enterprises. They must confirm that "willful defaulters and those enjoying rescheduling facilities do not get the fund."
BUILD also called for identifying the highly-affected sectors based on priority and ensuring adequate liquidity assistance to banks. "Loan size should be adequate to keep the borrowing companies afloat during the crisis."
"Duration of subsidy on interest rate should not be limited to one year if the crisis prolongs. It should be increased accordingly."
The government has announced a stimulus package of Tk20,000crore to provide working capital to the cottage, micro, small and medium enterprises (CMSMEs) sector.
Banks want the guarantee of their funding. So a credit guarantee scheme can be formulated so that disbursement can be easy and the SMEs get benefitted, says BUILD.
"Government could add a part to the stimulus to create a credit guarantee or risk-sharing programme for financial institutions to provide adequate access to finance for the SMEs. Organisations such as Palli Karma Sahayak Foundation, Bangladesh Small and Cottage Industries Corporation or Small and Medium Enterprise Foundation can be assigned to handle cottage and micro-enterprises. And scheduled banks can handle the SMEs."
BUILD maintains that safeguarding employment is a crucial challenge now. So the government must ensure that the businesses do not make the decision to cut jobs due to the economic slowdown.
The government could provide tax benefits to companies that create new jobs even in this crisis moment.
Along with that, an extra 2 percent tax rebate may be provided to those companies that will refrain from any kind of lay-off decisions within one year, recommends BUILD.
In the stimulus package announced for the agricultural sector, the interest rate on agricultural loans has been fixed at 4 percent. But it can be cut to 2 percent, says BUILD.
Also, the loan repayment period can be extended from the current deadline, which is 18 months with a grace period of six months, to two years or 24 months.
"Food processing, import-substitute industries, shrimp, crab, eel and frozen food sector need to be included in the eligible list for the loan. Some other potential sector such as essential organic oil, seed collection and preservation, jute also can get the benefit."
A monitoring committee needs to be formed to ensure transparency and oversee the proper use of the stimulus packages, says BUILD.