Banks are more likely to give loans to big borrowers than small businesses, though the central bank and the government had clear orders to disburse loans thus the entrepreneurs can get rid of losses. Only Tk 13,505 crore worth of loans were disbursed in FY22, which is only 67.52% of the total target for Cottage, Micro, Small, and Medium Enterprises (CMSME). As the small enterprises have little mortgage capacity, they secure small loan facilities. The government has not chalked any strategy to evade the system.
The CMSME sector has been the most affected during the pandemic, and yet they are getting less credit as banks are more inclined to disburse loans to big borrowers. In the case of small borrowers, they are often left discouraged as they face various complications while getting loans from the banks. Data shows that, under the export development fund, only 2% interest incentive was announced for the big-scale traders to increase the scope to import raw materials under back-to-back letter of credits (LC) and almost 100% of the Tk 29,750 crore was distributed.
Disbursement of the working capital stimulus loans for firms in the affected industrial service sector enterprises were targeted at Tk 33,000 crore in the outgoing fiscal. In the previous fiscal year, a loan package of Tk 40,000 crore was announced in this sector, and at that time the number of beneficiaries was 3,306 industries. The pre-shipment credit refinance scheme has been announced to the tune of Tk 5,000 crore. From this package, 70 institutions have received loans worth Tk 725 crore, which is only 14.51% of the set target of Tk 5000 crore.
Banks need some confidence in disbursing loans. In that case, small entrepreneurs get much fewer loans due to various obligations to fulfill the formalities of small entrepreneurs. So generally the disbursement of small loans is always lower than the target because banks are reluctant to give loans to small entrepreneurs. The central bank has received complaints that the stimulus fund was used to adjust the interest of previous loans. We think the government should provide separate but integrated policies to stimulate the CMSME sector.
