Interest rate burden stalls CMSMEs, finds latest EIB study

High interest rates, reaching 14% in some sectors, are making bank loans unsustainable for many, while exporting and airfare costs have surged by 40% for some, significantly impacting their export competitiveness, finds a survey of the Economic Intelligence Bangladesh, a joint publication of DataSense and The Business Standard. 

Furthermore, global demand has declined sharply in sectors like jute (by 60%), and government incentives and subsidies have been reduced (such as RMG and agro-businesses), adding to the financial strain, says the EIB survey. 

Business owners emphasized the urgent need for targeted interventions to support the vital CMSME sector. The survey also highlights that less than 1% of enterprises use loans to start new ventures, indicating a significant barrier for nascent businesses.

The 11th issue of EIB titled "CMSMEs and their Plights" released on Wednesday conducted In-depth interviews with 11 cottage, micro, small, and medium enterprises (CMSMEs) across 10 sectors. The sectors include ready-made garments (RMG), leather, jute, light engineering, fisheries, agro and food processing, e-commerce, handicrafts, tanner and second hand market. 

The interviews were taken from November 2024 – January 2025. 

CMSME leaders emphasize a unified call for more comprehensive governmental and financial support. Existing incentives, while appreciated, are deemed insufficient to address the scale of the problems. The need for increased access to bank financing at reasonable rates, streamlined bureaucratic processes, and enhanced assistance to reinforce their global competitiveness emerged as critical priorities. 

Market access remains a significant impediment to expansion, with non-tariff barriers and fierce international competition compounding the difficulties faced by smaller enterprises already struggling with financing.   

Despite the headwinds of inflation, rising interest rates, and escalating input costs, the interviews show the remarkable resilience and innovative spirit of these entrepreneurs who continue to fuel growth across various sectors. 

For our detailed findings, visit: https://intel.tbsnews.net/11th-issue/