The finance ministry has decided to involve deputy commissioners and upazila nirbahi officers in speeding up the loan disbursement process for cottage, micro, small and medium enterprises (CMSME), in a bid to reach a 100% target by 31 October this year.
The Financial Institutions Division (FID) – which operates under the ministry – has also decided to set a loan disbursement target for branch managers of banks and encourage them to grant loans of up to Tk2 lakh without direct intervention from senior officials.
The decision was made at a virtual meeting presided over by the Financial Institutions Division's Senior Secretary Md Ashadul Islam on Thursday.
The CMSME loans will be disbursed from the Tk20,000 crore stimulus package, earmarked by Prime Minister Sheikh Hasina amid the Covid-19 pandemic.
Announced in March this year, the initiative began in April with a target of reaching 100% disbursement by August. But the Bangladesh Bank later extended the deadline till 31 October due to the low disbursement of loans within the previously specified period.
According to the central bank, 56 banks across the country managed to disburse only Tk3,330 crore in CMSME loans until 15 September, which is only 16.65% of the Tk20,000 crore stimulus fund.
There are more than two crore CMSMEs in Bangladesh, but only 14,302 entrepreneurs got the loans as of 15 September, which is only 0.07% of the total number.
Meanwhile, the eight state-owned commercial and specialised banks set out to provide Tk3,143 crore in CMSME loans, but they managed to disburse only Tk183 crore until 15 September, which is a mere 5.83% of the target.
Under the circumstances, the government has made the latest decisions to boost the CMSME loan disbursement process so that 100% of the stimulus fund can be granted to those in need within 31 October.
In accordance with the Bangladesh Bank's agriculture credit policy, there are already agricultural loan monitoring committees at the district and upazila levels, headed by DCs and UNOs. The committees, which also have bank officials as members, support district and upazila level farmers in getting loans.
At the meeting, the FID decided to amend the previously issued Bangladesh Bank circular to allow the inclusion of district and upazila level committees in the CMSME loan disbursement process.
Confirming the matter while speaking to The Business Standard, FID's Joint Secretary Md Shukur Ali said a circular in this regard might be issued as early as next week.
He further said, "The loan disbursement process – facilitated from the Tk30,000 crore incentive package earmarked for large industries – is moving forward as expected, but we have observed minimal progress in the CMSME fund disbursement process.
"The Cabinet Division has asked the FID to speed up the CMSME loan disbursement process by amending policies if necessary. The Cabinet Division also wants updates on what steps the FID has taken to improve the ongoing situation."
He continued, "Among the eight state-owned banks, the CMSME loan disbursement progress of Bangladesh Krishi Bank (BKB) and Rajshahi Krishi Unnayan Bank (RAKUB) is satisfactory. But the other six commercial banks have made almost no progress in the matter.
"We have told them to reach their disbursement target within October by any means."
The BKB and RAKUB have hung banners in front of all their branches, illustrating the process of taking out loans from the CMSME fund. The state-owned commercial banks have also been directed to launch similar initiatives and run campaigns in newspapers and television.
When asked why seven out of nine foreign banks are yet to begin the CMSME loan disbursement process, Shukur Ali said, "We should not have involved these foreign banks in the stimulus package distribution process because it is not possible for them to distribute loans at the grassroots level.
"However, the loan disbursement rate of private banks is beginning to go up."
Top executives from the Bangladesh Bank, state-owned commercial and specialised banks, Palli Karma-Sahayak Foundation and Microcredit Regulatory Authority also participated in Thursday's virtual meeting.