The central bank has reportedly issued a guideline for disbursing Tk 200 billion to micro, small, medium enterprises (MSMEs) including cottage industries, announced earlier by the government, to boost production and overcome the Covid-19 impacts on them. The stimulus, a loan package and despite the government's sharing of 5.0 per cent of the 9.0 per cent interest rate, is a bit challenging to implement. However, the best that has, so far, emerged is that the central bank has wisely decided to provide half of the stimulus package, i.e., Tk 100 billion for the aforementioned clusters that constitute a major bulk of productive activities in myriad shapes and forms -- spread out all over the country. This decision was taken considering the liquidity crisis of the banks.
As per the central bank's guideline, commercial banks and financial institutions will provide loans or investment facilities to the enterprises as working capital from their own fund on the basis of banker-client relationship. The banks will have to disburse a minimum of 15 per cent of their yearly loan targets to businesses in villages and marginal areas from the stimulus package. The interest rate of this lending facility will be 9.0 per cent and the concerned industries and business organisations will pay 4.0 per cent, while the government will provide the remaining 5.0 per cent as subsidy, the guideline said. It adds that banks will have to provide 70 per cent loans of their yearly target to the cottage, micro and small enterprises while the rest 30 per cent should be provided to the medium enterprises.
Reading between the lines offers a few deterrents that may pose difficulties to address, despite the good intent of the government. First, for a mammoth sector like the MSMEs, need-based distribution of fund is not easy. Second, and indeed the most impeding factor likely to affect implementation of the package is the so-called banker-client relationship. No wonder, the foremost concern for the banks would be recoverability of the loans-- however low the rate of interest. Third, identifying the enterprises, especially the micro and small enterprises, may be rather difficult to work out. It is not known whether the central bank has categorised the sectors and sub-sectors in terms of their yearly turnover or not.
Observers feel that instead of just mentioning small and micro units for eligibility of loans, the guidelines should have spelt out the sub-sectors, prioritising them on the basis of their importance to the national economy in terms of productivity and employment generation. There is an apprehension that micro, small and cottage industries might be left out of the benefit unless the central bank stipulates in very clear terms the eligibility criteria based on their productivity, mode of operation, and marketing networks. Otherwise, medium enterprises, definition of which is rather vague, may consume bulk of the benefits.