SMALL businesses such as cottage, micro, small and medium enterprises, which were among the worst hit from the pandemic, appears to have started seeing the stimulus funds of late after initial reluctance from banks in disbursing credit to small businesses a national daily reported on Tuesday. We believe this is a right step as accelerated disbursement of credit will speed up recovery of small enterprises suffering from shortage of crucial support. As of March, this year 72.3 per cent of Tk 20,000 crore stimulus fund announced for the CMSME sector last year has been disbursed to 91,427 firms ahead of 66.5 per cent disbursement of Tk 40,000 crore fund to large industries.
The accelerated credit to small enterprises occurred over outrage about slow credit disbursement in this sector at the national level prompting the central bank to bring pressure on banks and non-bank financial institutions to meet their targets. Deadlines for disbursement were also extended for several times up to June 30. Earlier CMSMEs were to pay in many cases up to 25 per cent interest which had scared small and micro businesses from seeking bank loans. Banks were not interested as well to handle small loans for lower profit and fear of default. Now that the stimulus package offers loan at 4 percent to CMSMEs, many firms came up, and thus the disbursement picked up.
We would say CMSMEs or small businesses deserve low cost hassle free loan for being hard hit by the pandemic. Stimulus loan to large industries involve big package benefits to much lower number of people compared to small businesses. More people work with CMSMEs as hired workers or self-employed owners providing largest number of employment at the national level and contributing to GDP. Recovery of small enterprises in the rural economy is more crucial to help a multitude of people to earn livelihood.
The big challenge in reaching assistance to micro businesses or workers in the informal sector is however difficult because selecting real people is difficult. We would say the government must find a convenient way in this regard. Banks should not think of profit when lending to CMSMEs. There might be risks of default but the government needs to take some risk and back the bank.
