SMEs to get loan at 4% interest

It is good news that small and medium scale factories (SME) of the country will get the much-needed loan from the SME Foundation at 4 per cent interest. The financial assistance is aimed at helping the small entrepreneurs whose businesses have suffered hugely during the Covid-19 pandemic. They have watched helplessly their businesses collapsing amidst sufferings and deaths of fellow humans all around. The government-imposed lockdown compelled them to close down shops and factories. They also lost export orders from their foreign buyers as overseas markets remained closed during this period. As a result, most of the factory workers had to be terminated as owners could not pay their salary or wages.          

Against such a bleak background, the news of financial help at four per cent interest will surely lift up the morale of the entrepreneurs.  Reportedly, a sum of Tk. 200 crore will be disbursed by 31 December, 2021 and the amount of loan will vary from minimum Tk. one lac to maximum Tk. 50 lac. Entrepreneurs from remote areas and women owners will get preference among the applicants. The micro, small and medium enterprises will receive loans to help speed up the country’s economic recovery from Covid-19. On March 21 this year, the SME Foundation approved the policy and guidelines for this loan programme.

The foundation has signed an agreement with 18 commercial banks to this effect and the banks are: Brac bank, Bank Asia, Basic Bank, City Bank, Mutual Trust Bank, Dhaka Bank, NRB Commercial Bank, Premier Bank, Social Islami Bank, One Bank, Prime Bank, Kormoshongsthan Bank, United Commercial Bank, Eastern Bank, South East Bank, Rajshahi Krishi Unnayan Bank, IPDC  Finance, IDLC Finance and Lanka-Bangla Finance.  

It is good to know that the SME Foundation has always been mindful of encouraging and extending assistance to women entrepreneurs of the country. Besides arranging training for skill development, the foundation offers loans to deserving female entrepreneurs. Among those eligible for loan are those who did not get assistance from the first stimulus package, the physically challenged, third gender and new entrepreneurs. It has been announced that loans will be disbursed for jointly owned enterprises as well but a maximum of five entrepreneurs will get a loan under one group. And the SME Foundation will select the focal officials who will work to coordinate disbursements with the bank’s head offices, branches and entrepreneurs.

   As said earlier, such loan facilities at low interest rates will surely leave their mark on the development and expansion of the small and medium scale manufacturing units that play a vital role in the economy of the country. These factories are involved in the manufacturing business of some essential products like packets and packages for food items, paper products for students, pencils and pens, clothes and shoes and spare parts for various machinery, trucks, cars and motorbikes.

A large number of SMEs manufacture high quality handicraft items with jute, wood, cane, cloth, plastic, brass, earth and paper that enjoy good demand in foreign countries. Therefore, relevant government offices should be proactive in extending necessary support to them in their search for new export destinations.    

The total number of SMEs in the country is roughly 80,00,000 of which 93.6 per cent are small and 6.4 per cent are medium enterprises. Though SMEs have the potential for growth and face competition from other countries, high bank interest rate was the deterrent factor that came in the way of growth of this vital sector that employs a substantial number of women workforce. A good number of SMEs engage elderly women in the villages to make products on contract basis.

It is worth mentioning that in the 2020-21 financial year the SME Foundation distributed about Taka 116 crore among 1,069 entrepreneurs in 54 districts of the country through 13 banks and non-bank financial institutions at just 4 percent interest. Some banks and financial institutes disbursed loans in less than two months.

We hope the SME entrepreneurs will seize the four per cent interest on loans as an opportunity and invest judiciously to reap maximum benefits.