Banks miss CMSME stimulus disbursement target

Infographic: TBS

While most of the government stimulus packages, aimed at reviving the economy from the pandemic shocks, were disbursed in fiscal 2021-22, banks fell short of their loan disbursement target for the Cottage, Micro, Small and Medium Industries (CMSME) sector.

In FY22, banks disbursed Tk13,505 crore, which is 67.52% of the target of Tk20,000 crore, to the CMSME sector.  

Besides, disbursement of the Tk2,000 crore Credit Guarantee Scheme (CGS) under the CMSME package, was only Tk121 crore, which is merely 6%.

However, under the export development fund, 2% interest incentive was announced for the big-scale traders to increase the scope of import of raw materials under back-to-back letter of credits (LC) and almost 100% of the Tk29,750 crore, announced for this, was distributed.

Mustafizur Rahman, Distinguished Fellow at the Centre for Policy Dialogue (CPD), said, "Generally we see that the disbursement of small loans is always lower than the target because banks are reluctant to give loans to small entrepreneurs." 

He also said, "We always stress on taking special initiatives in disbursing loans to small entrepreneurs, because more jobs are linked with the small and medium ventures. Besides, it is also important for the economy." 

Mustafizur Rahman pointed out that small-entrepreneurs do not get more loans due to a lot of paperwork.  

"Some banks are offering loans based on transactions on the Bkash and Nagad platforms. Such innovative initiatives should be encouraged," he added. 

So far, the government has announced a total of 28 packages, worth Tk1,87,679 crores, to deal with the Covid-19 impacts. Of these, Bangladesh Bank is involved in 10 incentive packages, the financial value of which is Tk1,68,750 crores. Later, the Bangladesh Bank added another Tk50 crore dollars to the Export Development Fund (EDF).

The target of loan disbursement to customers under 10 incentive packages in the second phase has been set at Tk1,03,750 crore, of which Tk69,441 crore (66.93% of the target) have been distributed at the end of the fiscal.

Disbursement of Working capital stimulus loans for the affected industrial service sector enterprises stood at Tk11,322 crore, which is 34.30% of the target of Tk40,000 crore.

The loan disbursement target for this sector in the current fiscal has been fixed at Tk33,000 crore and so far 1,162 companies have availed the benefits.  

Under the pre-shipment credit refinance scheme 67 beneficiaries received loans in the amount of Tk651,86 crore, which is 13.03% of the target of Tk5,000 crore.

However, the central bank's monitoring report has revealed that the stimulus loan in the first phase of Covid-19 pandemic was taken for one sector and spent on another. The central bank has received complaints that the stimulus fund was used to adjust interest of previous loans. As a result, the Ministry of Finance has released money for the second phase at a slow pace for many banks. Due to this, the disbursement has been slow.

However, bankers say that the demand for stimulus loans is now very low.

Meanwhile, a loan of Tk3,000 crore has been fixed for the refinancing scheme for low income professional farmers and small traders. Out of this, 2,717 crores, which is 90.59% of the target, have been disbursed till 13 April.

A loan disbursement of Tk1,000 crore has been fixed for the salaries and allowances of the employees of hotels/motels/theme parks in the tourism sector. However, the limits have been set based on the status and demand of the respective banks for disbursing loans under this package.

Apart from these, Tk1,606 crore, which is 53.55% of the target of Tk3,000 crore, have been disbursed under a refinancing scheme in the agriculture sector. Besides, 84.66% of the target of Tk5,000 crore has been disbursed in this sector in the first period at an interest rate of 4%.