A refinancing fillip for CMSMEs

With the global economy already showing signs of slowing down, one of the preventive measures to safeguard small industries is to provide refinancing so they can embrace uncertain times.

Economic hardships in the past have shown that small and medium enterprises are always the most vulnerable in times of crisis. Most probably, taking lesson from past, Bangladesh Bank unveiled a Tk. 25,000 crore refinancing scheme for the Cottage, Micro, Small and Medium (CMSME) enterprises.

Reportedly, borrowers will get term loans at a maximum rate of 7 per cent while lenders will obtain the funds from the central bank from a 2 per cent interest rate.

This is indeed optimistic news because during the pandemic lockdowns, small industries were hurt the most with many forced to shut down while others diversifying their products to survive.

After the global pandemic, SMEs are facing a capital shortage, higher operational cost, workers lay off.

Banks and non-bank financial institutes can disburse loans under the scheme through branches and sub-branches, agent banking or Mobile Financial Services (MFS).

However, the caveat is that defaulters of previous loans will not be eligible to apply for this facility, which is understandable because in times of austerity and stringency, there’s no point throwing good money after bad.

The incentive for small and medium enterprises will also work to attract young university graduates eager to shun the traditional employment based career to emerge as entrepreneurs.

The government also needs to adopt a liberal outlook in selecting entities, which can be provided support because the modern day youth will always come up with innovative business models that cannot be brushed aside for being too ambitious.

At the same time, blindly handing away funds is not the ideal approach either because the last thing the government would want is a load of delinquent loans.

To ensure optimum usage of the funds, an assessment board, either at the central bank or at the finance providing entity, is essential. This board can carry out a swift market study looking into pros and cons and decide if certain small and medium enterprises, featuring novel ideas, are feasible or not.

For any business incentive related intervention, the ever changing nature of global commercial operations, especially a war in Europe wreaking havoc on energy supply, ought to be taken into account.

An SME venture, which could have been a success two years ago, may not seem that appealing in the current circumstances.

The current refinancing scheme also has a provision stating that organisations handing out loans will have to keep the central bank informed of the status of disbursed loans – which can be a much needed safeguard against potential defaulters.

It’s widely known that Bangladesh Small and Cottage Industries Corporation (BSCIC) provides comprehensive support services to small, rural, and cottage industry of Bangladesh, particularly in the small and cottage industries sector. While the government provides the financial support, BSCIC should create a bridge with overseas markets for products manufactured by our artisans in the cottage industry segment.

In a globalised world, any enterprise, small, big or medium will thrive once there is a market abroad and for this, concerted efforts is essential from the embassies abroad.

The world economy is going through a turbulent period with countries desperate to seek out new markets. Bangladesh must aggressively explore new territories, especially in Africa and South America.

To cope with the Covid-19 pandemic onslaught, loans are needed but for long term sustenance, local plus and overseas market are crucial. As part of Corporate Social Responsibility, CSR, large multinationals can get involved by providing low interest loans to small industries in rural Bangladesh, with special focus on women entrepreneurs.