584 small borrowers get collateral-free loans

Some 584 cottage, micro and small enterprises (CMSEs) have received Tk 62.68 crore collateral-free loans under the credit guarantee scheme of the central bank to get over pandemic shock.

The Bangladesh Bank launched the scheme of Tk 2,000 crore on July 27, 2020 for the first time to support the pandemic-hit CMSEs feeling the pinch.

The small businesses that lack adequate collateral are able to get the bank loans under the rescue plan.

The scheme provides coverage of Tk 20,000 crore stimulus package announced for the sector.

Up to January 04 this year, 13 banks and NBFIs gave Tk 62.68 crore to 584 small borrowers under the credit guarantee scheme, as per the latest data from the Bangladesh Bank.

A high official of the central bank said they are getting huge response from the lenders for the scheme.

More than 500 small borrowers have got collateral-free loans under the scheme at the initial stage, while the number of borrowers will increase at least three times at the end of this year, said the BB official, who is directly involved with the scheme.

IDLC Finance lent highest Tk 24.69 crore among 255 small borrowers; Agrani Bank Tk 3.35 crore among 34 borrowers; Standard Chartered Tk 17 lakh; One Bank Tk 33 lakh; Trust Bank Tk 17 lakh; UCBL Tk 35 lakh; Jamuna Bank Tk 17 lakh under the scheme during the period, said the BB data.

Credit Guarantee Scheme for small borrowers is a good initiative, said Mirza Elias Uddin Ahmed, managing director of Jamuna Bank.

Many banks are not showing interest about CGS at the initial stage but the popularity of the scheme will increase in the upcoming days, he added.

If the features of the scheme were more flexible and simpler, it would attract more banks and NBFIs for CGS, said Ahmed.

Despite launching CGS for small borrowers, banks and financial institutions have failed to speed up the loan disbursement from the second-round stimulus package meant for the cottage, micro, small and medium enterprises (CMSMEs).

From July to December 21 last year,  52 banks and non-bank financial institutions lent Tk 4,136 crore out to 2,8303 CMSME customers, according to the latest Bangladesh Bank data. The figure is 21 per cent of the total stimulus package.

After the expiry of first-round stimulus loans in June last year, the central Bank announced another Tk 20,000 crore for the current fiscal year.

The latest stimulus programme is expected to continue for three
years.

“The loan disbursement is expected to rise this year as we are now getting huge response from clients,” opined Jamuna Bank managing director.

“We hope that the credit growth will go up by 15-20 per cent this year because the industrial expansion has started even amid the Covid-19 pandemic,” he pointed out.

The Bangladesh Bank in November 2020 rolled out a guideline for the credit guarantee scheme to give the much-needed cushion to the cottage, small and micro enterprises.

Lenders will be allowed to avail 30 per cent of their total distributed loans from the CGS if the amount disbursed turns default, as per the BB
guideline.

The clients have to pay 1 per cent commission on their loans to the banks when they avail the fund while lenders deposit the commission to the central bank.

In December last year, the banking regulator widened the limit of loans under the credit guarantee scheme for cottage, micro, small and medium enterprises.

The limit of credit or investment has now been fixed at Tk 25,000 to Tk 1 crore, up from Tk 2 lakh to Tk 50 lakh previously.