Stimulus reaches 1.24 crore beneficiaries

Only 3,245 large firms have enjoyed 39% of the total disbursed stimulus loans when around one lakh small businesses have received 17% as of May, reflecting how unequally financial packages have been implemented, according to the latest report of the Bangladesh Bank.

The stimulus packages, announced by the government to revive the pandemic-hit economy, have reached around 1.24 crore beneficiaries as of May this year, the report said.

Of the total incentive packages amounting to Tk1.28 lakh crore, 65% has so far been implemented, according to a statement of the central bank data.

The varying speed of implementation of the various liquidity support packages has created an unequal turnaround as bigger firms have rebounded more strongly, owing to quick access to liquidity packages, while smaller firms have been largely left behind, said the Centre for Policy Dialogue (CPD) while presenting its latest analytical report titled "State of the Bangladesh Economy in FY2020-21" on Monday.

The think-tank also raised a question about transparency and accountability of stimulus implementation. 

"It is critical to make sure that beneficiaries are selected based on clear, objective, and quantitative criteria and vested interests are not allowed to intervene," the CPD said.

"Without connections with local powerful people, it has been proved to be difficult to get included in the list of beneficiaries," it alleged adding, "Widespread corruption has taken place in the distribution of government's relief items."

The government announced 23 financial packages to incentivise pandemic-hit businesses and marginal people. 

Of the packages, 12 were implemented with the direct involvement of the Bangladesh Bank. 

Under the 12 packages, loans amounting to Tk83,053 crore have been disbursed till 20 May, according to Bangladesh Bank data.

Of the incentive packages, only two packages - one for large industries and another for paying wages to garment workers - were implemented fully. 

The implementation of other stimulus packages seemed very slow, prompting the central bank to serve a show-cause notice to some private banks. 

Implementation of the stimulus package for CMSME (Cottage, Medium and Small Enterprise) sector is slow due to a lack of documentation from borrowers, said a senior executive of Bangladesh Bank. 

However, the central bank served a show-cause notice to some private banks that failed to meet the disbursement targets, he said.

Such strict action was taken to accelerate loan disbursements under the stimulus package for the CMSME, he said.

However, loan disbursements under the stimulus package for large industries have almost completed, he added. 

It is because banks need to handle a small number of clients under this package, which is easy for them to disburse and monitor, he added.

Stimulus implementation scenario 

The Tk33,000 crore package for large industries is the largest one among 23 packages. 

The implementation of the package has almost been completed. The number of beneficiaries under this package was 3,245, according to Bangladesh Bank data.

The Tk20,000 crore package for CMSME  is the second-largest package announced for small businesses.

The implementation of the package has been 73% as banks seemed reluctant to disburse loans to them because small businesses have been affected the most, and they think it would be difficult to recover loans from them.

The number of beneficiaries under the package has been 95,733 as of May. 

The Tk2,000 crore credit guarantee scheme was formed to encourage banks to come forward for disbursing stimulus to SMEs. But the banks' responses seemed very poor as only Tk29 crore was taken from the guarantee scheme. The number of beneficiaries under the scheme was 274.

The Tk5,000 crore stimulus fund for paying wages to garment workers was provided at almost free of cost to garment owners. Garment owners had to pay only a one-time 2% service charge to get the fund. Some 37,78,969 workers were direct beneficiaries of this fund.

The other financial packages reached 84,79,768 beneficiaries.

The CPD report said liquidity support and fiscal stimulus packages rolled out without prior assessment of the ground realities may not be able to address the needs of the most vulnerable people in society.

In particular, providing loans to vulnerable individuals and small businesses may not yield the expected results.

Hence, it is urgent for the government to reconsider liquidity support as the primary mode of economic response to Covid-19, and increase fiscal stimulus and direct cash transfers to the poor.

Follow us on Google News