BB sets target for banks to disburse CMSME loans

Banks have disbursed Tk300 crore financial assistance to cottage, micro, small and medium enterprises (CMSMEs) in July and August under the government's second phase loan incentives to the sectors, said Bangladesh Bank sources. 

The government under its second phase incentive package, has allotted Tk20,000 crore to Covid-19 affected CMSMEs in FY22.

The central bank has set targets for disbursement of the loans for 57 banks and five non-bank financial institutions (NBFIs) in the country. 

The banks were given a target of disbursing Tk19,345 crore, while the NBFIs will distribute the rest. Of this, the state-owned banks will distribute Tk2,770 crore. Moreover, among the state-owned banks, Agrani Bank has been given the highest target of disbursing Tk790 crore, followed by the Janata Bank with Tk800 crores.

For the private banks, the distribution target has been divided into two categories, Islamic and non-Islamic banks.

The Islamic banks have been given a target of distributing Tk5,925 crore while non-Islamic banks have been given a target of distributing Tk10,195 crore.

Islami Bank will distribute the most among the private banks. The bank has been given a target of Tk2,250 crore. It is followed by BRAC Bank which has been given a target of Tk1,400 crore, UCBL Tk1,100 crore, Exim Bank Tk900 crore and Al Arafa Bank has been given a target of Tk850 crore.

Meanwhile, last Thursday, the FBCCI President Md Jasim Uddin demanded the proper implementation of the incentive package declared for the CMSME sector to tackle the impact of the ongoing pandemic.

He said 37% of Covid incentives in India, 33% in Thailand and 24% in Malaysia have been allocated to CMSME sector. But the allocation in Bangladesh is only 22%.

Although the implementation of incentive package in export and large sector is satisfactory, the implementation rate in CMSME sector is only 77% in the last financial year. In such a situation, quick disbursement of incentive loans among the cottage, small and medium entrepreneurs has become a crying need to sustain their business.

In response to such demands of business organizations, the Bangladesh Bank issued the new instructions for disbursement of CMSME incentive loans on the same day.

Bangladesh Bank, in its new directive, said, necessary instructions were given earlier for the implementation of the financial assistance package of Tk20,000 crore for the CMSME sector announced by the Prime Minister.

To make the disbursement process easier, the central bank has added some new instructions in its new circular.

According to the circular, at least 70% of the total disbursement target allocated under this package has to be provided to the cottage, micro and small scale enterprises (CMSEs) while the rest 30% will go to the medium scale industries.

Of the 70% given to the CMSEs, 65% has to be disbursed to manufacturing and services sub-sectors and the remaining to trading sub-sector.   

On the other hand, the 30% allotted to the medium scale industries, has to be disbursed to production and services sub-sectors.

Also, at least 8% of the total disbursed loan has to be provided to women entrepreneurs. Loans under the incentive package have to be disbursed within 30 June, 2022.

Under the incentive package, both working capital and term loans will be provided to cottage, micro and small sector entrepreneurs. Only medium sector entrepreneurs will be eligible for working capital loans.

An entrepreneurial organisation will get a subsidy from the government under this package for a maximum of one year after taking the loan. Defaulted borrowers will not be eligible for this package.

Each bank will select customers on the basis of banker-customer relationship under their own existing policy. Banks or financial institutions will determine the required loan amount after identifying the affected institutions.

The interest or profit rate of this loan will be maximum 9%. The borrower will pay a maximum of 4% of the interest on the loan. The remaining 5% will be subsidized by the government.