The Financial Express

Bailing out Covid-hit SMEs  

| Updated: June 30, 2020 22:36:40

Bailing out Covid-hit SMEs   

A recent meeting in Dhaka, timely in nature, has laid special emphasis on the imperative of easing the access of small enterprises to the Tk 200 billion bailout package reserved for them. Prime Minister Sheikh Hasina announced on April 5 a Tk 727.5 billion stimulus package to diminish the corona impact. Of the amount, Tk 200 billion had been kept in reserve for lending as working capital to the   cottage, micro, small and medium enterprises (CMSMEs).  While dwelling on the COVID-19 fallout in the country, speakers at the meeting portrayed these enterprises as being extreme sufferers. In course of delineating their present hardship, the meeting singled out a few major disincentives currently affecting the country's small and medium units: not getting access to the reserved financial support because of failure to meet certain conditions, absence of formal banking transactions, and guarantee. The enterprises also include a large segment of informal ones.

The significant recognition of the CMSMEs' contribution to the nation's economy notwithstanding, this sector has failed to elicit enough response from the policymakers guiding the national economy. Even the banks tasked with the disbursement of the funds are dilly-dallying in the programme's implementation. Thus, it was quite reasonable for the meeting participants to call for an innovative and holistic approach while tackling regulatory issues --- expediting easier access to finance; and recognising the challenges of the 21st century business scenario to overcome the impediments created by the corona pandemic affecting the country's CMSMEs. Attended by the Industries Minister, the meeting has heard valuable suggestions from SME entrepreneurs and policy experts. A piece of long-awaited information came from the minister at the meeting, as he told the audience that the SME database would be updated soon. It would ensure that all CMSMEs get access to the government's stimulus package.

The government's financial cooperation extended to the small, medium and micro-level entrepreneurs couldn't have come at a riper time. The problem lies with its implementation. It comprises unnecessary delays caused by red tape, lack of coordination, and systemic flaws detracting from its potential for standing by the beleaguered entrepreneurs. Their sense of being sidestepped by the policy makers is not unfounded. Stuck in the present deadlock, the CMSME sector has been made to experience the times of employee redundancy and glut in unsold products. In the post-pandemic period, the nationwide positive developments are expected to warrant the need for employment generation and product diversification, among other imperatives. The SME-specific goals cannot be achieved with lax monitoring of the said loan's disbursement. A financial boost is sure to play a massive role in injecting renewed vigour into the pandemic-afflicted CMSME sector. 

That the depressing news about the plight of the COVID-19-hit cottage, medium and small enterprises was in the making had been feared for quite some time. In the initial phase, few were able to read the extent of the terrible times awaiting the SME sector. But the inevitable has occurred. Many mid- and small-level ventures began falling on hard times. To say that the CMSME sector is now in dire straits is a plain fact. The recent displeasure shown by the Bangladesh Bank (BB) over the failure of the banks and financial institutions to add speed to the disbursement of stimulus-loans among CMSMEs is a natural reaction. Of all considerations, it is the need for allaying the foreboding vis-à-vis more critical times in the future that has necessitated the creation of the partly BB-financed CMSME package.

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