Bangladesh’s cottage, micro, small and medium enterprises (CMSMEs), a priority sector of the government, cannot avail of the stimulus loan as fast as they had expected due to its slow disbursement process.

Bangladesh Bank has set a loan disbursement target of Tk 20,000 crore in its second round to cottage, micro, small and medium enterprises (CMSMEs) by December next.

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But the disbursement target may be missed as only 2.82 percent loan was disbursed during the July-August period among 2390 firms of CMSMEs, according to the central bank statistics.

“The disbursement of the remaining volume by December may not be possible as many of the CMSMEs finally cannot fulfil the conditions of banks to receive the loan,” said Syed Mahbubur Rahman, Managing Director and CEO of Mutual Trust Bank.

He said extra efforts need to be taken on this front as the central bank’s CGS has no impact on loan disbursement yet as its conditions are too tough for small entrepreneurs to meet.

“More than 90 percent of CSMEs in Bangladesh are informal which are not registered with any government authority and don’t maintain any financial records,” Mahbub said.

As a result, he said, these CSMEs are highly unlikely to benefit from the newly implemented credit guarantee scheme (CGS) since commercial banks do not usually lend to informal businesses because of higher perceived risks.

Dr Mirza ABM Azizul Islam, a former caretaker government adviser, told UNB that CMSMEs face two type challenges -- operational and financial.

He said the CMSMEs do not properly maintain data or their data are too unorganized and that is why it is difficult for banks to assess their financial conditions.

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Banks tend to provide loans to their customers with pre-existing relationships and the CMSMEs without their existing relationship are likely to be deprived of loans, Azizul said.

Other analysts suggest easing the existing conditions and introducing 100 percent credit guarantee scheme (CGS) in CMSMEs considering it is the most employment generating sector.

A recent survey of BUILD-UNIDO found that 65 percent of large firms received government support where only 6 percent vulnerable SMEs have received it while the regional average is 36 percent during March to July 2021.

The survey at the firm level impact of Covid-19 in Bangladesh by Business Initiative Leading Development (BUILD) works here as a concern of the United Nation Industrial Development Organization (UNIDO).

The UNIDO prepared a report as part of its global multi-country analysis of the impact of Covid-19 on the manufacturing sector in Asia focusing on impact of pandemic on firm performance, firm-level responses to the pandemic and policy as well as support of the government for recovery.

The main problems they faced since the start of the pandemic in Bangladesh are lack of workers due to illness of 24 percent, a 17 percent fall in demand due to restrictions, 26 percent for non-delivery of orders for restrictions, 32 percent for lack of supply, 62 percent for the increased cost of inputs and 61 percent for fall in demand due to the crisis.

Bangladesh has 17,384 micro enterprises, 15,666 small ones, 6,103 medium and 3,639 large-scale enterprises where a total of 5.02 million people are engaged, the study says.

According to the study, if these can be resolved through methodical measures, the country's GDP will get a significant contribution from this sector.

The survey also found that the SMEs faced more loss in sales than large firms. Non-manufacturing SMEs witnessed 43 percent sale loss while it is 33 percent for vulnerable SMEs and 29 percent for resilient SMEs.

Access to finance is still the main obstacle for women-led small and medium enterprises as banks hesitate to lend to CMSMEs run by women, said Ferdaus Ara Begum, the CEO of BUILD.

“Women entrepreneurs complain that despite fulfilling the criteria set to get bank loans, they are often being denied the facility as bankers lack confidence about giving loans to them,” she said.

BUILD has recommended providing a 100 percent credit guarantee to banks for disbursement of the allocated amount, while prioritizing inclusiveness, extension of loan moratorium period till June, 2022 for CMSMEs.

The government announced the stimulus package to help small businesses in the pandemic-hit economy.