BB to sit with banks tomorrow to speed up stimulus CMSME loans

The Bangladesh Bank is going to hold a meeting tomorrow (Thursday) with the commercial banks to give a push for stimulus loan disbursement among the Cottage, Micro, Small and Medium Enterprises (CMSMEs) as such disbursal is still low.

Most banks have failed to speed up the handing out of loans from the second stimulus package meant for the CMSMEs, which prompted the central bank to arrange the meeting, said a high official of the BB.

The meeting is scheduled at 3pm on Thursday while Bangladesh Bank Governor Fazle Kabir would preside over
it, said an official at SME and Special Programmes Department of the central bank.

In the meeting, the banking regulator will warn the lenders of lackluster stimulus loan disbursement to the CMSME sector, as per the official.

The SME and Special Programmes Department has already invited the managing directors and the CEOs of commercial banks for the meeting.

After the expiry of first stimulus loans in June last year, the Bangladesh Bank announced another Tk 20,000 crore for the current fiscal year. The latest stimulus programme is expected to continue for three years.

During July to February of the current fiscal, 52 banks and non-bank financial institutions lent Tk 6,818 crore out to 43,256 CMSME enterprises, according to the latest Bangladesh Bank data.

The figure is 34 per cent of the total Tk 20,000 crore stimulus fund for the CMSME sector.

Of the total Tk 6,818 crore disbursed loans, banks and NBFIs disbursed Tk 323 crore among 3,531 women enterprises, as per the BB data.

Banks officials say most CMSME borrowers who are yet to recover from the pandemic shock failed to repay the previous loans; besides, a higher operational cost to disburse SME loans is responsible for slow disbursement of the stimulus fund.

Policy Research Institute of Bangladesh Executive Director Ahsan H Mansur attributed the 9 per cent ceiling for lending to major reason behind the slow disbursement of the sector.

He said where the interest rate for lending is up to 25 per cent in microfinance, it is only 9 per cent in the case of banks, which is not profitable for banks.

In the first round, around Tk 15,000 crore was disbursed, which was 75 per cent of the of total stimulus loans.

The banks and financial institutions were also slow to give out loans to the CMSMEs.

In line with the government instruction, the BB published a policy in April 13 of 2020 laying out guidelines for banks and financial institutions on providing working capital to the CMSMEs affected by the pandemic, capping the interest rate ceiling at 9 per cent.

Of the interest, the government bears 5 per cent as subsidy and the remaining 4 per cent will be borne by borrowers.