The progress made in the disbursement of the stimulus packages that the government had announced to provide relief to various Covid-hit sectors, barring a few exceptions, has been well below expectations. Bank funds have flown in substantial volume into the courtyard of large industries, service entities and export-oriented apparel units. But the situation is altogether different in the case of small and cottage industries, agriculture refinancing and low-income professionals, farmers and micro-business. The disbursement of funds to the latter has been well short of the targets.
While the small, medium and cottage industries got less than 25 per cent of the funds earmarked for them until September last, the apparel units have got more than what was originally allocated. Now the representative body of the latter group -- the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) is seeking a decade-long moratorium on all outstanding loans and repayment of loans under stimulus package over five years, instead of two years. Undoubtedly, the concessions sought are substantial, yet they might get a few, finally.
Small is beautiful is an oft-used quote. But, to banks, small enterprises or borrowers are not that attractive. The flow of funds to small and micro enterprises even during the normal time does bear testimony to that fact. Big borrowers because of their social clout and, at times, political connections do receive special attention from banks. In some cases, even bankers are found taking a soft approach to many delinquent big borrowers. A comparison of the default loans recoverable from the large and the CMSEs (cottage, micro and small enterprises) would show how neglected the latter group is in the country's formal financial circles. The CMSE borrowers despite being far bigger in numbers do have a smaller amount of default loans.
There is no denying that many CMSEs are shy of approaching the formal financial institutions because of the formalities involved in the loan processing. They are found to be more comfortable in availing funds from informal sources, including cooperative societies and money lenders. These sources do usually charge higher rates of interest on the funds they lend.
The pandemic has hit the CMSEs more than the large and medium enterprises which have greater ability to face odds. In the absence of necessary support, financial or otherwise, thousands of CMSEs have gone out of business. The prospect of their making a comeback appears to be remote. The fate of many more CMSEs is hanging in the balance. Low-cost financial support might help them survive and make a steady recovery.
The government is aware of the situation. That is why it has extended the time for the disbursement of stimulus loan packages. Under the prevailing circumstances, the banks will have to be proactive in matters of timely availability of low-cost loans to the CMSEs, agricultural refinancing schemes, low-income professionals, farmers and micro-businesses. These essential operators in the economy do need financial help more than many others.