32.5% disbursed in 7 months of FY22

Loan disbursement among the marginalised people, including micro-entrepreneurs and low-income groups, through scheduled banks was low amid the coronavirus pandemic.

The government announced Tk 20,000 crore in incentives in the fiscal year 2021-22 for low-interest loan disbursement among micro and medium entrepreneurs through banks to aid economic recovery.

However, banks disbursed Tk 6,500 crore till January 2022, which was 32.5 per cent of the target.

Former chairman of the Association of Bankers Bangladesh Syed Mahbubur Rahman told The Business Post microfinance institutions (MFIs) sought loans with 6-7 per cent interest though the government had set the maximum rate at 9 per cent, which was why disbursement had decreased amid Covid-19.

Mahbubur, also the Mutual Trust Bank managing director, said banks suffered a liquidity crisis amid the pandemic and that was why it was tough to grant loans at low interest.

Bangladesh Bank Executive Director and Spokesperson Md Sirajul Islam said, “We are regularly directing banks to disburse loans among the marginalised people.”

“Banks cannot cover their management costs by disbursing low-interest loans among MFIs. This is another reason why disbursement was low.”

The marginalised people are still struggling to survive the pandemic shocks through farming and small businesses by borrowing from banks and MFIs. MFI insiders say these people could earn their livelihoods more smoothly if loans were available.

MFIs received Tk 16,779 crore from scheduled banks in 2021, down from Tk 20,019 crore in the previous year, according to the Microcredit Regulatory Authority (MRA).

The amount was Tk 21,060 crore in 2019, Tk 13,266 crore in 2018, and Tk 15,217 crore in 2017, MRA data shows.

MFIs get funds from six sources – savings of members, Palli Karma-Sahayak Foundation loans, bank loans, donor funds, cumulative surplus, and other funds. Scheduled banks are one of the top fund sources while MFIs disburse loans as microcredit.

Besides, government or private banks disburse loans directly among cottage, micro, small, and medium entrepreneurs as small and medium enterprise (SME) loans.

“Bank loan disbursement among the low-income people declined amid Covid-19. Micro-entrepreneurs could have recovered from the crisis better if bank loans were available like previous years,” MRA Executive Vice-Chairman Md Fasiullah told The Business Post.

He said MFIs disburse loans after receiving them from banks or other sources.

“Our borrowers smoothly repaid their instalments amid Covid-19. That is why deposit as well as loan disbursement and recovery increased during the pandemic,” he added.

MFI insiders say several sectors have been affected by the pandemic, except for agriculture that has retained growth, thereby boosting microcredit disbursement and the number of borrowers.

Buro Bangladesh Executive Director Zakir Hossain said they have confidence in loan disbursement as all types of transactions increased amid the global health crisis.

“It is high time to survive this crisis by creating micro-entrepreneurs. The grassroots economy will get a boost if we can increase fund sources.”