Bangladesh Bank (BB) has revised the directive to maintain the audited financial reports of loan renewals and file of new loans in accordance with the rules in order to bring order and transparency in CMSMEs loan disbursement. But considering the global economic situation and to accelerate the economic activities of the country, the time frame for renewal of loans to 'cottage, micro, small and medium sector entrepreneurs (CMSMEs)' and guidelines for preservation of audited financial reports has been extended by two years. On Monday, the Banking Regulations and Policy Department of BB issued a circular in this regard and sent to the executives of banks for immediate execution. The circular stated that the companies in the CMSME sector, which are considered as public interest entities according to the Financial Reporting Act, the financial reports audited by the chartered accountants at the time of loan approval and renewal of those companies must be compulsorily stored in the loan file from January 1, 2025. Read more: BB relaxes ICRRS to facilitate businesses’ loan In the earlier directive, the retention period for these loans was fixed from January 1, 2023. The new directions have been emphasised to accelerate the economic activities of the country by taking into account the global economic situation and by increasing the flow of credit to the CMSME sector.
Bangladesh Bank’s deputy governor Abu Farah Md. Nasser has said despite having a credit guarantee scheme of Tk 2000 crore for cottage, micro, small, and medium enterprises (CMSME), loans of only Tk 192 crore has been disbursed so far under the facility, which he said was “disappointing”. He said proper utilization of this credit guarantee scheme is crucial for the revival of CMSMEs. Nasser said this while speaking as the chief guest at a workshop titled “Issues and Opportunities of CMSME Lending”, organized by the Dhaka Chamber of Commerce and Industry (DCCI) on Saturday in the capital. “Though the CMSME sector is called the engine of our economy, and CMSME financing is the fuel of that engine, the financing in this sector is disappointing despite taking different initiatives by the central bank,” he added. Read more: BB revises cluster credit guidelines to boost small enterprises Nasser also said that to reach out to the CMSMEs, banks should think of establishing more sub-branches across the country rather than creating agent banking because creating sub-branches help cut extra administrative costs. “We are going through a tough time due to the Ukraine-Russia war and at this time if we try to control interest rates forcibly, it may create a recession,” he added. The manufacturing and service sector should get priority in getting loans right at this moment to control inflation, considering the global scenario, he said. The Bangladesh bank deputy governor urged the experts to think about developing an online marketplace and blockchain as alternatives to the traditional loan system. Bangladesh Bank has identified a total of 19 clusters, and Nasser urged all the banks to give CMSME loans under these clusters. Later he said that creating a Digital Bank (special focus on CMSMEs) is in the planning of Bangladesh Bank. DCCI President Rizwan Rahman said, “CMSME sector plays an important role in making our economy grow but due to lack of policy support and financial support, we cannot fully utilize this sector. Commercial banks and financial institutions sometimes sense risks in giving loans to CMSMEs.” Read more: Stimulus for CMSMEs: BB asks banks to complete loans disbursement by June Till 2022, 73.77 percent of the stimulus, or Taka 147.46 billion has been disbursed but most of it went to medium enterprises. He also said that regulators should give CMSMEs more access to information and communication technology, and financial assistance so that they can have the ability to boost manufacturing and be competitive in the supply chain process. Md. Jaker Hossain, Director, SME and Special Programmes Department of Bangladesh Bank, presented a keynote paper. Md. Nazeem Satter, General Manager, SME Foundation, in his separate keynote paper highlighted that there are more than 7.8 million CMSMEs across the country. He said only banks are not sufficient to ensure loans for CMSMEs, rather, alternative capacity of MFIs, NGO Foundation, Karmasangsthan Bank, BSCIC, SME Foundation should be utilized to disburse loan among the CMSMEs.
Despite the central bank's priority, banks have failed to achieve the stimulus loans (phase-2) disbursement target among cottage, micro, small and medium entrepreneurs (CMSMEs). According to the latest report of BB, banks have disbursed Tk14,746 crore against the target of Tk 19,340 crore for FY22, which is 73.77 per cent of the target. In the previous fiscal year (FY21) banks disbursed the CMSMEs loans 77 per cent of the target. It means banks’ CMSMEs loans disbursement reduced by 4.15 per cent in FY 22 than the FY 21. Also read: BB asks banks to cut power use 25 pc, energy 20 pc in a year Banks distributed these loans among 82,190 entrepreneurs in the FY 22. Among them, there were 73,642 male entrepreneurs while 14,617 female. In June, the last month of the fiscal year (FY), Tk3323 crore of loans were distributed among 17,913 entrepreneurs. Of which, women entrepreneurs were 3,296 and male entrepreneurs were 14,617. In the second phase, state-owned banks disbursed loans of Tk2, 280 crore, which is 82 percent of the target. Read: BB asks banks to keep branches open in Dhaka cattle market areas on July 8,9 The loan disbursement by specialized banks is Tk 241 crore, which is 96 percent of the target. Foreign banks disbursed Tk72 crore, which is 38 percent of the target and Islamic banks disbursed Tk 3,636 crore, which is 64 percent of the target. Agrani Bank Limited has disbursed the highest loans among the state-owned banks. The bank had a target of Tk 890 crore. Against this, Agrani Bank has distributed Tk 1,113 crore, which is 125 per cent of the total target. Sonali Bank disbursed loans of Tk 537 crore against the target of Tk 500 crore, which is 107 per cent of the target. Read SME Foundation disburses Tk300 crore stimulus loans to 3,106 entrepreneurs Bangladesh Krishi Bank has disbursed loans 99 per cent against the target of Tk 200 crore. The bank has disbursed Tk198 crore. Foreign City Bank NA has achieved 100 per cent of the CMSMEs loan disbursement target. Besides, the private sector AB Bank has disbursed 105 per cent loans of the target. The target of the AB bank was Tk 240 crore and it disbursed Tk 253 crore. Read Bangladesh Bank's role in steering economic recovery appreciated Despite the effort of BB, banks failed to fulfill the CMSMEs stimulus loan disbursement target in two consecutive years. The CMSMEs borrowers alleged that banks harass the borrowers in the name of documents for lending.
Bangladesh Bank (BB) has instructed banks to speed up disbursement of stimulus funds among businesses in Cottage, Micro, Small and Medium Enterprise (CMSME) sector to achieve disbursement target by June. The central bank asked the top executives of banks to ensure all-out support and enhance monitoring of stimulus loans disbursement for CMSME sector. Read: BB asks banks to stop SWIFT payments with Russian entities, urges caution on LCs The central bank fixed the deadline after seeing slow pace in stimulus loan disbursement to CMSMEs in the last 8 months (July-February) of the fiscal year (FY) 2021-22. Md. Serajul Islam, executive director and spokesperson of BB, told UNB on Sunday that a special cell of the central bank jointly with Sonali Bank is monitoring the disbursement of stimulus loans to CMSMEs. Besides, lead banks (selected for leading loans disbursement in specific districts) are working in combination with other banks to bring pace in stimulus loans disbursement, he said. The spokesperson said that the central bank provides credit guarantee against all types of loans for CMSME sector entrepreneurs. The government declared a Tk 20,000 crore stimulus loans package to help the CMSMEs from to overcome the financial shock due to the Covid-19 pandemic. Read: BB working on alternatives to SWIFT for trade with Russia In the first phase, the loan disbursement rate was 77 percent of the target in eight months (July-February) in the last fiscal year. In the second phase, the banks disbursed Tk 7,117 crore loans among businesses in CMSME sector in the first eight months of the current financial year (July-February) which is 36.80 percent of the target.
The government is borrowing USD $ 300 million from the Asian Infrastructure Investment Bank (AIIB) to provide working capital loans to the companies of cottage, micro, small and medium enterprise (CMSMEs) sector. Meanwhile, the Ministry of Finance and AIIB have signed an agreement to implement the loan project through a third party on-lending basis. READ: AIIB to provide greater support for global green recovery, says senior executive The government has taken up a project titled Covid-19 Emergency and Crisis Response Facility to implement the loan project within the 2023-24 fiscal. Bangladesh Bank has already started its activities for the current financial year. Entrepreneurs in the CMSME sector will get this working capital for a period of 1-year with 4 percent interest and 1 percent service charge.
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. Read:CMSMEs divisional Mentorship Program launched at DU 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.
Speakers at a webinar Tuesday stressed the need for framing a COVID-19 pandemic focused budget for the next fiscal year giving the highest priority to the health sector to mitigate the health-related risks alongside focusing on sound macroeconomic management, widening social safety nets, raising the tax-GDP ratio and generating more employments. They also emphasised strengthening the ongoing vaccination programme, carrying on necessary tax reforms as well as reducing the corporate tax rates, ensuring proper budget implementation and quality spending of development projects, addressing the livelihood issues in the context of pandemic, prioritising the CMSMEs and bringing the education sector under the purview of the stimulus packages. The recommendations came up with at a webinar on ‘Macroeconomy: Expectations from National Budget 2021-22’ jointly organised by the Institute of Chartered Accountants of Bangladesh (ICAB) and the Economic Reporters' Forum (ERF). The Economic Affairs Adviser to Prime Minister Dr Mashiur Rahman agreed with the suggestions to enhance budgetary allocation on the health sector and thus strengthen the ongoing vaccination campaign. Stressing the need for carrying out necessary reforms in the financial sector and in the revenue sector, he said reforms in the capital market and bond market is also necessary to attract the large scale investors. Mashiur noted that if the lion’s share of the deficit financing could be made available from the foreign sources then its impact on the domestic sector would not be that much. He also stressed the need for boosting confidence among the businesses and investors, attracting more FDI, ensuring skills development and sound basic education up to the secondary level. Distinguished Fellow of CPD Prof Dr Mustafizur Rahman emphasised on generating more employments, giving relief to the import substitute industries through taxation, revisiting the import regulations, enhancing quality expenditure, and ensuring necessary reforms. He was also critical about the scope for whitening black money in the budget saying it is an injustice to the honest taxpayers. Executive Director of PRI Dr Ahsan H Mansur proposed allocating Tk 15,000 crore for vaccination in the next budget and that fund should be made available from day one. For the new poor being created from the impacts of the pandemic, he said only cash support is not enough for them, rather some permanent measures should be awarded. The renowned economist also suggested addressing the livelihood issues due to the pandemic, prioritising the SMEs in the stimulus packages, focusing more on expenditure and said the budget deficit could be stretched from 7 to 8 percent. Executive Director of SANEM Dr Selim Raihan called for expanding economic operations and not having an obsessed mindset on growth, rolling out social safety net schemes for the urban poor, boosting business confidence through necessary measures, increasing budget implementation and ensuring some visible reforms. Former adviser to the caretaker government Rasheda K Chowdhury said that the next budget should be a pandemic-focused one while the education sector should be brought under the stimulus package as the losses to this sector is huge and it is invisible. "Education sector must not be less prioritised," she said. Chairman of PEB Dr M Masrur Reaz suggested for bringing around 50 percent of the country's population under the vaccination programme in the next one year, otherwise, the revival initiatives and recovery would be much tougher. He also proposed allocating one percent of GDP as social safety net for the poor as well as awarding another stimulus for the SMEs, especially for the small and micro-entrepreneurs. Senior research fellow of BIDS Dr Nazneen Ahmed strongly advocated for reducing the corporate tax rate, prioritising those development projects which are nearing completion, keeping budgetary allocation on creating health awareness as well as on health disaster management, making cheaper the internet facilities and also making available the gadgets for the poor students. BGMEA President Faruque Hassan urged the government to provide policy support to the affected industries till the crisis ends so that those could make a turnaround. He also demanded the government to keep the tax rates stable for 10 years or at least for five years for turnaround of the Industries. Chairman of Trustee Board of BUILD Abul Kasem Khan suggested for the continuation of the stimulus packages in the next budget as well as rationalizing taxation measures and improving the investment climate. MCCI President Barrister Nihad Kabir put utmost priority on ensuring qualitative spending of development projects through real-time basis monitoring and evaluation by the IMED, raising the tax-GDP ratio, giving policy support to CMSMEs, and also to check the trend of dodging tax and laundering of money abroad. DCCI President Rizwan Rahman suggested reducing the corporate tax rate progressively by 2.5 percent in the next three years and thus brings it at 25 percent to facilitate the businesses. Coming down heavily on the scope for whitening undisclosed money, he said that the business community would not accept such provision for whitening the money coming from 'burglary'. "Otherwise, the honest businesses will not feel encouraged to pay tax from the next year," he added. BASIS President Syed Almas Kabir suggested keeping the digital transaction out of the purview of VAT for the next 3 to 5 years to facilitate online transaction and wider materialisation of the 'Digital Bangladesh' initiative. ICAB President Mahmudul Hasan Khusru said the tax net is not widening that is why honest and existing taxpayers are overburdened with incremental tax recovery target. “While we would be graduating as developing country, our preferential benefits would be eroded, we’ve to compete with other developing countries. Hence, human resource development is paramount important, capacity building of our institutions and adoption of advanced technologies and professional education are also important to emphasise in the budgetary allocation,” he added. FICCI President Rupali Haque Chowdhury, former President of AmCham AKM Aftabul Islam, chief news editor of the Daily Prothom Alo Shawkat Hossain Masum, ICAB vice presidents Sidhartha Barua, Md Abdul Kader Joaddar and council member of ICAB Mohammad Forkan Uddin spoke at the webinar. Former ICAB president Md Humayun Kabir moderated the function while its CEO Shubhashish Bose spoke. ERF President Sharmin Rinvy made the opening remarks while its general secretary SM Rashidul Islam gave the vote of thanks and ICAB Vice President Maria Howlader gave the closing remarks.
Finding a balance between achieving revenue targets and ensuring a business-friendly environment is crucial to overcome the economic challenges unfolded by the pandemic. The government's expenditure comes from revenue, but it always tries to facilitate the businesses, National Board of Revenue member of tax policy Md Alamgir Hossain said Saturday. Alamgir was addressing the "Pre-Budget Discussion for FY2021-22" organised by Dhaka Chamber of Commerce and Industry (DCCI) in association with Samakal and Channel 24. Economic Affairs Adviser to the Prime Minister Dr Mashiur Rahma said "Achieving the revenue target without hurting economic activities is a priority for the government." Also read: NBR to prioritize local industries in 2021-22 budget, says its chairman "However, our tax-GDP ratio is comparatively low due to rebates at different levels. To make it more acceptable to everyone, a global standard tax, value added tax (VAT), supplementary duty (SD) and customs duty rate need to be in place." Dr Mashiur said frequent changes in tax rate may slow down business growth and he suggested a gradual increase in it with a minimum time frame. Brac Chairperson Dr Hossain Zilllur Rahman said, "As the second wave of Covid-19 is going on, it may wallop the economy. The next budget should also have a plan of recovery like the last one. Social protection should get major attention in it." Disbursement of loans under stimulus for the cottage, micro, small and medium enterprises (CMSMEs) should be faster, and for that, mobile financial services can be engaged as a delivery vehicle, he added. Also read: Budget 2021-22: Finance Ministry's coordination council meets to set priorities, parameters Zilllur Rahman added that to keep the growth trajectory upward, the domestic market needs to be incentivised along with the export sector. "We need a transition from cheap labour economy to skilled labour economy and a game-changing policy review needs to be framed." DCCI President Rizwan Rahman hoped that the next budget would have special attention to taxation and VAT policy, infrastructure, industry and trade as well as the financial sector.
Economic Affairs Adviser to the Honorable Prime Minister Dr Mashiur Rahman on Monday said centralisation approach is a constraint for CMSMEs development in Bangladesh and emphasised the importance of regional connectivity towards an inclusive, efficient and balanced development of the country.
The Innovation, Creativity and Entrepreneurship (ICE) Centre of Dhaka University (DU) on Monday launched a five-day ‘Bijoy Dibosh-2020 Virtual CMSMEs Divisional Mentorship Program’.