The government has planned to roll out a fresh loan package for entrepreneurs of small and cottage industries to overcome the COVID-19 economic shocks in the sector while half of the previous incentive of Tk 20,000 crore meant for the same group remains to be disbursed.
Tk 10,000 crore has been proposed as the subsidised loan package to small and cottage industry entrepreneurs to be disbursed by micro-finance institutions and specialised banks at maximum 9.4 per cent interest rate.
The government would provide a 5.5 per cent interest as subsidy while the loans would range from Tk 10 lakh to Tk 50 lakh each under a policy formulated by the Financial Institutions Division of the ministry of finance.
Economists welcomed the initiative but asked the government to resolve the problems that have obstructed a speedy disbursement of the previous loan fund under the Tk 1.21 lakh crore stimulus scheme announced in phases since April 2020.
On Sunday two new stimulus packages worth Tk 2,700 crore were announced, increasing the number of such packages to 23 and the incentive fund to Tk 1.24 lakh crore.
FID additional secretary Ruhul Azad told New Age on Sunday that a draft policy for disbursing the loan fund under the proposed Tk 10,000 crore package would soon be placed for approval by finance minister AHM Mustafa Kamal.
The Bangladesh Bank will notify the details about the proposed loan package in line with the policy after it is approved by policymakers, said another FID official.
The FID has, he said, taken an initiative to arrange the loan package amid allegations that marginal businesses remained out of the Tk 1.21 lakh crore stimulus scheme.
Former Bangladesh Bank governor Salehuddin Ahmed said that the proposed new loan programme demonstrated that the previous loan package to small and medium entrepreneurs was mostly a failure.
Stakeholders participating in the three seminars in December 2020 on the implementation of the stimulus packages blamed bankers for the failure in disbursing the loan fund to cottage, small and medium enterprises.
Organised by the Finance Division, the seminars were told that the rate of loan disbursement to big industries was higher than that to small and cottage industries.
Until November 2020, the disbursement rate for big industries under the Tk 40,000 crore package was 71 per cent.
As of December 17, 2020, only Tk 9,271 crore, out of the targeted Tk 20,000 crore for cottage, micro, small and medium entrepreneurs, was disbursed forcing the central bank to extend the disbursement deadline till March.
The readymade garment sector has availed the entire Tk 5,000 crore allocated for it at 2 per cent service charge and received further Tk 5,500 crore from the Tk 40,000 crore fund meant for large industries.
Salehuddin said that there was no guarantee of success of the fresh loan package unless the government addressed the problems in the disbursement of the previous stimulus fund by the commercial banks and non-bank financial institutions.
In August, the BB introduced a new credit guarantee scheme in an effort to bolster the loan disbursement process for small and medium entrepreneurs but without any major success, said Centre for Policy Dialogue research director Khondaker Golam Moazzem.
He also doubted the success of the proposed loan package for small and cottage industries, saying that the MFIs might not feel encouraged to disburse loans at 9.5 per cent interest rate.
He also said that the minimum loan ceiling should be lowered to Tk 2 lakh.
According to the proposed FID policy on the new loan package, an MFI would be allowed to have a fund equivalent up to 10 per cent of its balance for loan disbursement.
An individual or a group categorised as a small industry entrepreneur would get maximum Tk 50 lakh in loan while the ceiling would be Tk 10 lakh for each cottage industry entrepreneur and Tk 30 lakh for a micro industry entrepreneur.
The borrowers will return the loan in two years with a six-month grace period.
The policy, according to FID officials, has the criteria for the selection of MFIs and prohibits amortisation of previous credit with loans from the fresh package.
It also stipulates that a borrower could spend 40 per cent of the loan for trade finance and 60 per cent for production and service business.
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