Cottage, micro, small and medium enterprises (CMSMEs) cannot take advantage of the government's stimulus packages because of delays in disbursements by banks, said experts.
Many entrepreneurs are not being able to apply for the low-cost loans as they cannot fulfil the conditions of submitting trade licences and other documents, including VAT and income tax returns, the speakers said at a virtual dialogue on Wednesday.
A good number of these businesspeople are being deprived for not having anything to offer as collateral for loans, they said at the event organised by the Citizen's Platform for SDGs and Bangladesh and Business Initiative Leading Development (BUILD).
Only Tk4,120 crore or 20.5% has so far been released from the Tk20,000 crore working capital support declared for the CMSMEs initially, they said.
On the other hand, only Tk1,060 crore has been disbursed from the Tk3,000 crore package meant for farmers, ultra-small businesses and poor communities.
The speakers recommended formulating a strong action plan to complete the disbursements by October.
While presenting a keynote paper at the event, Abul Kasem Khan, chairperson at the BUILD, said the CMSME sector is contributing about 25% to the country's GDP and producing about 90% of industrial output. The sector also contributes 99.84% to the private sector.
The sector has created 7.76 million jobs, which is 35.5-50% of the country's total employment and about 80% of industrial jobs, he also said.
Covid-19 hit the sector hard, so entrepreneurs do not have much confidence about their business recovery from the pandemic shocks soon, Abul Kashem added.
About 75% owners of cottage and micro industries are facing a risk of partial or total shutdown of their business operations within three months, while the number is 58% for small and medium enterprises and 44% for the large industries, he pointed out.
Some 48% firms from cottage and micro industries apprehend that they might witness more than 50% fall in revenue from the past fiscal year and it is 30 % in SMEs and 23% in large industries, he said.
The keynote revealed that about 33% of firms from the large industries think it will take more than 6 months to get back to normal, while 38% of SMEs and 64% of cottage and micro enterprises anticipate the full recovery time to be more than six months.
Abul Kasem Khan also said the government declared a Tk20000 crore stimulus package for the CMSMEs, which later reached Tk59,292 crore, including the agriculture and rural credit for FY21 worth Tk26,292 crore and some other packages.
Disbursements from the packages were very low due to several constraints. That is why the government extended the disbursement time to October 31 from August 31 this year.
"To ensure total disbursement of the remaining 80% fund by October 31, an aggressive implementation strategy needs to be ensured," he said, suggesting an effective strategy to utilise the stimulus packages.
Most firms under the CMSMEs are seeking support from the microfinance institutions due to a lack of access to the banking sector, he added.
About 41% of cottage and micro firms are relying on commercial banks for loans to combat cash flow crunches, while 50% of them are relying on microfinance institutions, the report revealed adding about 66% of SMEs and 86% of large industries depend on commercial banks, said the BUILD chairperson.
Banks have been going slow in processing loans for the SME sector. Some 80% of the enterprises are not able to take out loans because of this long process. They cannot also provide required documents and offer collateral for loans. Some 18% do not even have any connection with the banks, he also said.
A large number of firms from the CMSMEs remain out of banking services, he added.
Speaking as the chief guest, Industries Minister Nurul Majid Humayun said the CMSME sector is a driving force of the economy. Its importance has increased during this Covid-19 period. However, due to a lack of monitoring, many services are not reaching them properly.
The banks want to make profits as commercial entities. They will seek all kinds of documents prior to giving loans. But, small entrepreneurs do not have the capacity to meet all the conditions of the banks. So this issue must also be considered, the minister added.
"All the benefits announced for the CMSME sector go to medium-sized enterprises. So, micro and small ones need separate facilities. We have to change the policy to protect their interests," he said.
He also assured that the government will take steps to provide collateral-free loans to small entrepreneurs.
Dr Debapriya Bhattacharya, convener of the Citizen's Platform for SDGs, said the issue of lack of balance in political power has come to the fore in the CMSME sector in the process of announcing stimulus packages and their disbursements. Because, demands of the entrepreneurs in this sector are still not reaching the political arena.
There were inequalities, inconsistencies and deprivation in the stimulus packages. In other countries of the world, small companies have been given direct subsidies. But here in Bangladesh, loans have been declared. Yet, many have not got it.
Shams Mahmud, president of the Dhaka Chamber of Commerce & Industry (DCCI), said the CMSME sector has no proper definition. That is why some medium-sized enterprises are taking the lion's share of the sector.
He also said the sector is facing several problems, regarding tax, utility bills and house rents.
The DCCI sought initiatives from the government to solve these problems.
Syed Almas Kabir, president at the Bangladesh Association of Software and Information Services (BASIS), said IT firms have no physical assets but intellectual property rights. "An 80% credit guarantee scheme will be helpful for the IT firms," he said, recommending introducing this system for all sectors.
Syed Nasim Manzur, managing director of Apex Footwear Limited, said, the Bangladesh Bank should circulate an order for the banks to disburse loans under the stimulus packages without collateral.
Seeking a rent subsidy from the government, he also said house rent is now a big burden on the CMSMEs. "Many house owners are evicting businesses for not being able to pay rents."
Syed Abdul Momen, head of SME at Brac Bank Limited, said Brac bank has portfolio worth Tk12,000 crore, of the amount, Tk10,000 crore is collateral free.
The banks are taking more time to disburse loans under the stimulus packages due to a lack of understanding. The clients do not have enough information on the packages too.
Dr Momtaz Uddin Ahmed, a professor of Dhaka University said, there are no specific definition and database for the SMEs in Bangladesh. The Bangladesh Bureau of Statistics also failed to provide time-based data for the sector.
Asif Ibrahim, chairman of the Chittagong Stock Exchange, said 1.9 million of workers from the appeal sector received stimuli through the mobile banking system.
"Why is the system not being followed for other sectors" he questioned.
Humaira Chowdhury, co-founder and managing director of Frontier Technology Limited, said she is trying to get a loan from the stimulus package from the beginning, but she is yet to receive that.
Anwara Ferdousi, president of the Rangpur Women Chamber of Commerce and Industry, said female entrepreneurs are facing various hassles to get loans under the stimulus package from banks. They are being served with legal notices to repay old loans.