Bottlenecks start with definition complexities

Fast disbursement of the government's stimulus packages among cottage, micro, small and medium enterprises (CMSMEs) is facing bottlenecks, starting with complexities over the definition of these entities, said speakers yesterday.

A lack of required documents alongside inconsistency and incoherence in paperwork submissions, complicated loan disbursement process, collateral issues, absence of bank account and poor relation and coordination among financial institutions and entrepreneurs also hinder the process, they said.

In Bangladesh, CMSMEs account for 80 per cent of industrial employment and 45 per cent of value addition in the manufacturing sector, said Rizwan Rahman, president of the Dhaka Chamber of Commerce & Industry (DCCI).

"But this sector's capacity and potentials could not be utilised to its full extent for a lack of financial and policy support."

He spoke while addressing a virtual workshop on "Procedures and preparedness of getting loan from stimulus package from banks" organised by the DCCI, according to a press release.

Over 100 DCCI members participated in the workshop for a better understanding on easily availing stimulus loans.

The government, in two phases, declared stimulus packages amounting to Tk 40,000 crore to help these entities cope with the coronavirus pandemic and revive the economy, Rahman said.

But the bottlenecks, including the lack of a database, have sometimes made it difficult for the entrepreneurs to avail loans, he said, calling for expediting the loan disbursements.

"Stimulus loan disbursement is quite satisfactory in city areas but not up to the mark in remote areas," said Jaker Hossain, general manager of the SME and special programmes department of the Bangladesh Bank.

In the first phase, Tk 15,500 crore was disbursed from the stimulus package whereas, in the second phase, Tk 6,217 crore was distributed as of February 9.

Hossain believes that there could be some misconceptions among bankers and entrepreneurs at the field level which slowed the disbursement process.

Stating that banks are not reluctant to give loans and now are aggressively looking for clients, Hossain requested the entrepreneurs to maintain proper documents and cooperate with banks to get loans fast.

He also requested bankers not to harass the loan seekers.

Regarding the definition, the BB official said the entities would be redefined in the next new industrial policy.

"We have to promote real SMEs and for that, we have to change our mindset to facilitate real SMEs."

An SME database is very essential for distributing loans, said Md Rafiqul Islam, executive vice president of Islami Bank Bangladesh Ltd, in a keynote paper.

The small-sized firms represent 90 per cent of businesses while formal SMEs contribute up to 40 per cent to the gross domestic product in emerging economies, he said.

To make it easy to provide stimulus loans, entrepreneurs at first need to be categorised under the correct segment, he said, adding that policies of the central bank were very flexible and adequate.

As per the central bank guidelines, 30 per cent of loans of banks and financial institutions are dedicated to small-scale entities, said Islam.

He also pointed out that a banker had to follow almost 86 rules and regulations in day-to-day banking activities.

A minimum set of documents are needed for the loans as banks have to ensure financial transparency, he said, requesting loan seekers to maintain consistency and coherence in documents they submit.

Islam said digitalisation of all services would help the process to a large extent. "Banks are ready and very willing to disburse loans but the number of proposals is not that substantial."