COTTAGE, micro, small and medium enterprises that do not receive the credit intended for them on easy terms and access, despite clear government and central bank directives, are holding back the sector’s recovery from the economic fallout from Covid . It is disappointing that less than 10% of a Tk 2,000 crore credit guarantee scheme has been disbursed to CMSMEs. Bangladesh Bank established the fund as a credit guarantee scheme in July 2020 for unsecured loans especially for CMSMEs. So far, only Tk 192 crore has been disbursed. On November 12, the Deputy Governor of Bangladesh Bank once again emphasized the proper use of the credit guarantee scheme. Describing the CMSME as the engine of the economy, the Deputy Governor expressed his disappointment at the worrying financial support for the sector despite the initiatives and facilities offered by the central bank. About 73.77% of the stimulus package intended for the CMME sector has been disbursed and what remains troublesome is that most of it has gone to medium enterprises while small, micro and small enterprises have remained largely destitute.
A pro-rich bias is evident in the disbursement of packages, with large industries receiving their share in full and early while CMSMEs have been denied access to their share. One of the reasons that concerned authorities often cite for poor disbursement of funds to small and medium enterprises is that most small businesses are not bankable and have no borrowing record with banks. The reason, however, seems unacceptable given that the government has repeatedly asked banks to simplify their terms and conditions to bring the benefits of the funds to CMSMEs. What is also concerning is that women entrepreneurs in the sector were the most disadvantaged section to access funds under the stimulus packages. The central bank announced in August 2021 an incentive for financial institutions to encourage the disbursement of loans to women entrepreneurs. Yet, the lending rate to female entrepreneurs has been extremely low. The CMME sector, made up of around 7.8 million enterprises, employs about 80 percent of workers in the informal sector and the sector has been declared a push sector for its growing contribution, nearly 30 percent, to gross domestic product. .
The government, the central bank and the SME Foundation have taken a number of initiatives and directed and incentivized banks and financial institutions to guarantee easy loans to CMSMEs, but nothing seems to have yielded the expected results. The government and the central bank must therefore find ways to ensure early disbursement of loans to CMMEs. A mechanism should also be put in place to facilitate the connection between small entrepreneurs and financial institutions.