Support SMEs for quick economic recovery amid Covid-19 pandemic
Sunbd Desk || Published: 2020-06-28 15:51:56 || Updated: 2020-06-28 15:51:56
The SME Foundation yesterday called for the extension of credit facilities to small and medium entrepreneurs on easy terms to help them contribute to economic recovery amid the coronavirus pandemic.
The plea made at the 14th annual general meeting of the foundation came as the World MSME Day was observed across the globe yesterday, in order to raise public awareness about the contribution of the cottage, micro, small and medium enterprises (CMSMEs) to sustainable development and the global economy.
The Covid-19 pandemic has threatened the existence of 2.5 million SME’s in Bangladesh, which employ 40 per cent of the labour force with a GDP contribution of 25 per cent, according to the International Labour Organisation.
Small businesses, including those run by women and young entrepreneurs, are being hit hardest by the economic fall-out of the pandemic. Unprecedented lockdown measures enacted to contain the spread of the coronavirus have resulted in supply chain disruptions and a massive drop in demand in most sectors, the United Nations said.
“Let’s not forget that these enterprises, which generally employ fewer than 250 persons, are the backbone of most economies worldwide and play a key role in developing countries,” it said on its website.
“Economic recovery would not be sustainable without giving importance to the SME and agriculture sectors,” Atiur Rahman, a former governor of the central bank, told saterday.
The government has announced a Tk 20,000 crore stimulus package to help the CMSME sector recover from the coronavirus fallout. Of which, Tk 10,000 crore will be provided by the central bank under a refinancing scheme.
Commercial banks can charge a maximum interest rate of 9 per cent for the loan. However, it would cost 4 per cent for the CMSMEs as the government would bear 5 per cent of the interest rate as a subsidy.
“But I think the whole Tk 20,000 crore should be lent under a refinance scheme,” Rahman said.
Rahman said banks are worried about risk management, so they may not like to lend to new borrowers and would rather may remain focused on existing borrowers.
The central bank should implement a credit guarantee scheme to help banks lend to the vulnerable CMSME sector, he said.
A partnership can be formed with microfinance institutions (MFIs) to implement the stimulus package because the MFIs know CMSMEs better, the former governor said.
According to the Rapid Assessment Survey 2020, conducted by the Centre for Policy Dialogue, a majority of enterprises surveyed have experienced a high level of adverse impact on production (about 42.9 per cent).
The government needs to think of additional measures to ensure that SMEs are actually able to draw benefits from the stimulus package, the CPD said in a paper recently.
Tk 20,000 crore is a good starting point and the amount would have to be increased in the days to come, Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, said recently.Report:TDS
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