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In the wake of a probable second wave of corona virus infections in the country, there are apprehensions that the economy would face a tough time with small businesses and low-income earners bearing most of the brunt. This is largely because whatever that has been announced in terms of stimulus package did not materialise in a desired manner. As news reports say the government's stimulus package has seen little success in reaching small businesses.
At a dialogue organised by the finance ministry titled "Stimulus Packages for Sustainable and Inclusive Recovery from Covid-19 Fallout in Bangladesh" last week, speakers said the government should think of rolling out more stimulus packages to ensure a quick economic recovery and protect firms and people as the threat of a second wave of coronavirus looms. Micro and small businesses are yet to benefit from the packages unveiled more than seven months ago, although they were the hardest hit because of the pandemic-induced adversity.
Disbursement of funds to small and medium enterprises was sluggish with only 31.73 per cent of the stimulus packages going to them till October 31, while a whopping 70.87 per cent went to big industries. The disbursement under other such packages meant for low-income people, farmers and informal sector workers was also not good, according to an update disseminated by the ministry of finance at the aforementioned dialogue. According to the finance ministry update, the RMG sector availed the entire Tk 50.0 billion allocation at 2.0 per cent service charge and has also received Tk 55.0 billion from the Tk 400.0 billion fund meant for large industries. So far, Tk 4.28 billion has been disbursed by the government's specialised banks to rehabilitate returnee workers and affected rural small business people from a package worth Tk 32.0 billion.
The central bank's guideline on helping the affected and retrenched workers from various industries is yet to be ready for the disbursement of Tk 15 billion. Another guideline, on disbursing the loan of Tk 20.0 billion to the micro and cottage industries is also yet to be completed.
Former governor of Bangladesh Bank Salehuddin Ahmed blamed the central bank for poor disbursement of loans to small businesses and criticised the reluctance of commercial banks in this regard, which were allegedly favouring influential quarters. Commerce Minister Tipu Munshi also expressed his disappointment regarding the role of the commercial banks. Economist Selim Raihan demanded the establishment of an independent review panel aimed at removing the bottlenecks in the extension of loans to SMEs, and the announcement of another stimulus package to face the looming second wave.
It may be noted that following the announcement of the stimulus packages, relevant quarters, including economists and analysts, were worried that the benefits of the package might not actually reach the target groups, as it is the 'bank-customer relationship' that while playing the decisive role in dishing out loans to prospective clients would deprive micro enterprises from benefiting from the government announced stimulus package. There was thus a strong feeling that unless access to loans by small and micro enterprises are significantly eased, the objective of the government to reach out to these firms might not succeed. This has now happened.
Most of the small, cottage and small enterprises in the country have not been able to benefit from the stimulus package because of cumbersome and lengthy banking procedures, that among others require mortgage and collateral. Reaching out to these enterprises which cannot afford required collateral at this time is crucially important. It is indeed difficult to tell the number of such micro and small enterprises. Reportedly, their total number could be well over four million including small selling outlets, grocery shops and cottage industries in different districts. Observers and economists feel that providing these units a good share of the stimulus package can only render the government's move meaningful. The loan package, despite government's sharing of 5.0 per cent of the 9.0 per cent interest rate, is still challenging to implement, and it was mentioned by many that unless a mechanism is in place to disburse the loan to the target groups, the outcome is going to be self-defeating.
No wonder, the foremost concern for the banks would be recoverability of oans-- however low the rate of interest. Identifying the enterprises, especially the micro and small enterprises, may be rather difficult to work out. It is not known whether the central bank has categorised the sectors and sub-sectors in terms of their yearly turnover or not. Observers feel that instead of just mentioning small and micro units for eligibility of loans, the guidelines should have spelt out the sub-sectors, prioritising them on the basis of their importance to the national economy in terms of productivity and employment generation.
The job is not simple. Still, the government has to examine the flaws that did not help the stimulus packages go in the right direction, and also devise ways on how best to make low income earners and small businesses benefit from its scheme. Rolling out more funds under the prevailing practice will not help. It is thus important to interact closely with experts in devising a meaningful course of action.