Banks slow on stimulus loan disbursement

Loan disbursement from the stimulus packages in the second phase is moving at a snail's pace as banks are waiting for interest subsidies from the government against loans they distributed last year.

In the first two and a half months of the current fiscal year, banks have distributed Tk519 crore as working capital loan among the Covid-affected industrial and service sector entities, which is just 7.6% of the target for the same period.

The Bangladesh Bank has set a target to disburse Tk33,000 crore in the current financial year in the sector. Till 12 September, only 55 industries have availed the benefits.

In the last fiscal year, the government announced a loan package of Tk40,000 crore for this sector and disbursed 81.75% of the amount among 3,306 companies.

To ward off the Covid-19 shocks, the government has so far announced 28 stimulus packages amounting to more than Tk1.87 lakh crore.

The Bangladesh Bank is directly involved in 10 of the stimulus packages. So far, three packages have been fully implemented and the remaining seven will be implemented this fiscal year.

According to the latest data, the central bank has a target to disburse Tk20,000 crore as working capital among small and medium enterprises. But only Tk477 crore has so far been disbursed, which is 2.38% of the target.

The central bank has set a target for the Tk5,000 crore package in the Pre-Shipment Credit Refinance Scheme. The number of beneficiaries under this package so far is 65 business entities that have received a loan facility of Tk375 crore. The amount is 7.51% of the target.

"The pace of stimulus loan disbursement has been slowing down as banks have not received the interest subsidy against the stimulus loans," Dr Fahmida Khatun, executive director at the Centre for Policy Dialogue, told The Business Standard.

"Besides, as the Covid impact was bigger last year, the affected borrowers took more loans. Now Covid situation is starting to get normal so many have reduced borrowing."

In April last year, the Bangladesh Bank issued a separate policy saying the tenure of stimulus packages would be three years.

If the loans are not recovered by the time, then they would be considered as regular loans of the distributing banks, it added.

The government has painted a rosy picture in the disbursement of loans from a Tk3,000 crore refinancing scheme set up for low-income professional farmers and small businessmen, who have received 73.87% of the target just in the two and a half months of this fiscal year.

The Bangladesh Bank has set a credit guarantee scheme of Tk2,000 crore for the SME sector in the current financial year. Twenty-seven banks and four financial institutions have already signed agreements with the central bank for disbursing Tk1,900 crore from the target.

Meanwhile, only two business organisations have received Tk28 lakh.

Dr AB Mirza Azizul Islam, the finance adviser to a former caretaker government, said, "We have passed just a few months of the new financial year. It would be clear after a while."

"However, many stimulus packages were not fully implemented even in the last financial year. To fully meet the target of loan disbursement, the respective sectors have to be brought under review."

The government has achieved complete success in two areas. A stimulus loan of Tk5,000 crore has been earmarked for the salaries and allowances of the workers and employees of export-oriented industries. This sector has already been 100% implemented.

At the same time, the government had set a Tk2,000 crore target for interest subsidy against loans disbursed by commercial banks in April and May last year. This has also been fully implemented.