The SME Foundation on Wednesday began the process of disbursing Tk100 crore in loans as part of the government's latest package to provide financial support for small and medium enterprises, but some entrepreneurs are concerned over the collateral requirement.
It earlier tasked nine banks and two financial institutions to select eligible applicants and distribute the loans, but new and small entrepreneurs have reached out to the SME Foundation with fears that they will not get any loans without collateral.
Entrepreneurs also requested the foundation to direct the banks and financial institutions to disburse such loans without any collateral, and maintain strict monitoring over bodies involved in the process.
They voiced their concerns and made the requests at a meeting on Wednesday, attended by SME Foundation officials, and representatives of associations and trade bodies from the SME industry.
The government had announced an incentive package of Tk20,000 crore for small and medium entrepreneurs last year, but many were unable to get the loans due to a myriad of factors, such as issues with banks' conditions, collateral, and not having familiarity with the banking process.
Under the circumstances, the government approved a new package of Tk1,500 crore this January for small traders, entrepreneurs and farmers.
It also involved the SME Foundation, Social Development Foundation, Rural Poverty Alleviation Foundation and Bangladesh Rural Development Board, Bangladesh Small and Cottage Industries Corporation (BSCIC), Small Farmers Development Foundation, Joyeeta Foundation and Bangladesh NGO Foundation in the distribution process.
SME Foundation is getting Tk300 crore under the package. Of the money, the foundation will disburse Tk100 crore to cottage, micro, small, and medium enterprises across the country within the next month. The rest will be disbursed in the next fiscal year.
Selected applicants will receive a loan of Tk1 lakh to TK75 lakh with a 4% interest rate, and they will have to pay the money back in 24 monthly installments.
Organisations picked by the government will disburse the loans under their own management, but the SME Foundation is utilising 11 banks and financial institutions for this purpose, as it does not have the necessary capacity, sources said.
At the meeting, entrepreneurs pointed out that many of them do not have assets that can be used as collateral, and they will not get any loans if the banks and financial institutions demand it.
Raising this issue, Bangladesh Association of Software & Information Services' (BASIS) President Syed Almas Kabir said, "Conditions for getting these loans must be eased, or many entrepreneurs will not be able to avail this facility just like last year.
"If banks assess whether an applicant is eligible for such loans, many will be left out. Banks do not want to disburse loans to new or small entrepreneurs. So the government must provide credit risk guarantee."
He added, "The banks will disburse the loans more easily if the government gives its assurance. Besides, the two year repayment period mentioned in the incentive package is not realistic; it should be extended to four or five years."
Bangladesh Engineering Industry Owners' Association President Abdur Razzak said, "Seventy percent of entrepreneurs involved with the light engineering industry are not interested in taking loans from the incentive package.
"They are pointing out that their shops are closed and they currently have no business. They have no use for a loan. How will they return the money in two years without any business?"
He continued, "So, we must make an effort to prevent people's situation from getting worse after they take out a loan. The two-year repayment window is too small, so it should be extended to five years."
The National Association of Small and Cottage Industries of Bangladesh (NASCIB) President Mirza Nurul Gani said, "Many could not avail the loans last year due to a number of complications.
"We need strict monitoring this year to properly implement the incentive package. If entrepreneurs fail to get the loans because of too many conditions, announcing an incentive package will not be of much help at all."
Bangladesh Electrical Merchandise Manufactures Association's (BEMMA) President Mosharraf Hossain Bhuiyan said, "The previous package mentioned collateral-free loans, but no entrepreneurs received such loans without it.
"A portion of the loans under the latest incentive should be provided without any collateral. Loans should be made available to enterprises involved with the SME Foundation and related associations. The repayment window should also be extended by another year."
Iqtadul Haque, general secretary of Bangladesh Agro-Processors Association (BAPA) said, "We are not yet free from the Covid-19 pandemic and we do not know when this crisis will end. It is difficult to run our businesses by taking out a loan under these circumstances.
"So, some of the loans should be disbursed without collateral."
Narayan Chandra Dey, general secretary of Bangladesh Plastic Good Manufacturers & Exporters Association (BPGMEA) said, "At least Tk50 lakh from the incentive package should be collateral-free loans."
SME Foundation's Managing Director Mofizur Rahman said, "We are making an effort to ensure that small entrepreneurs can get loans in time. We will resolve any and all issues. We will also not accept any list of applicants made by an intermediary.
"All lists will be forwarded to banks so that they can perform scrutiny on the applicants."
He further said, "There is no opportunity to increase the repayment window for the disbursed loans. The government has set the deadline, and only they can extend it. We also cannot direct a bank not to ask for collateral, but we can request them."