THE disbursement of loans to small and medium enterprises by banks and non-bank financial institutions declined by 10.34 per cent, or Tk 42.01 billion, in the first quarter of 2018 compared with the corresponding quarter of 2017. The banks and non-bank financial institutions, as a report of the central bank recently released says, could disburse Tk 364.19 billion in loans in the SME sector in the period as against Tk 406.20 in the same period the year before. Central bank officials say that the decline could be due to reduced lending funds to the SME sector because of liquidity crisis that started showing up beginning this January. Although the officials seem to be hopeful about an increase in the figure gradually depending on the liquidity situation of the banks, what remains worrisome is that the SME sector, which involves not so moneyed people in trade and business, has come to be affected. In other words, it means that big industrialists have had no problems in receiving loans from the banks but people in the SME sector who are not rich enough have had.
The government is quick enough to put more capitals into ailing banks whenever they face liquidity crisis, but in cases of SME loans not being disbursed to the target, the government seems not to have lifted a finger to streamline the banks. The government has provided Tk 146.55 billion for ailing banks in bailout funds in eight years since 2010 and Tk 114.87 billion of the amount has been shelved out only in four years, between the 2014 and 2017 financial years. The government has also set aside about Tk 15 billion in bailout funds in the national budget for the 2019 financial year. The government earlier provided Farmers Bank, which is a private bank, with more than Tk 7 billion in bailout funds to cope with its liquidity crisis. But when it comes to streamlining the banks and non-bank financial institutions in respect of the disbursement of loans in the SME sector, the government seems to be reluctant. The number of beneficiary entrepreneurs of the SME loans also declined by 23.8 per cent to 1,19,423 in the first quarter of 2018 from 1,56,740 in the first quarter of 2017. A situation like this calls out the government on shoring up issues that have held back banks and non-bank financial institutions from extending SME loans to their respective targets. The government should put in place a periodical monitoring mechanism to review loan disbursement and make banks and non-bank financial institutions meet the targets.
The government, under the circumstances, must have a proper plan and monitoring mechanism to periodically review the progress in the disbursement of loans in the small and medium enterprise sector. If the SME loan disbursement declines, it might not augur well for the economy as people in this sector are not rich and do not individually create a large number of jobs, but they all together employ a huge number of people who significantly add to the force that drives the national economy.
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