Stimulus loans elude many
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Banks blamed the latest floods for the weak implementation as this has discouraged entrepreneurs to take out loans, he said.
“But banks are also responsible for the lower disbursement as they have not taken adequate initiatives to give out the loans,” he said.
The Tk 5,000-crore stimulus package in the form of pre-shipment credit for the export sector made the worst start as only Tk 1.1 crore has so far been disbursed.
Exporters usually avail the loans before shipping products to complete packaging.
The central bank initially asked banks to apply to it for the loan within seven days after shipping exported goods. But this is quite impossible to do so for the exporters and the central bank revised the provision last month.
As per the new condition, banks will apply to the central bank for the loans within seven days after they bankroll clients.
“The latest central bank’s move will help implement the package smoothly,” said Syed Mahbubur Rahman, managing director of Mutual Trust Bank.
Banks disbursed stimulus package for large industries and the service sector promptly. Some 72.85 per cent of the Tk 33,000-crore package has been given out so far.
The whole fund of the package may be disbursed by September, the BB official said.
Lenders distributed Tk 1,060 crore among around 2 lakh clients under the stimulus package worth Tk 3,000 crore set aside for the underprivileged businesses and farmers.
The entire package could be implemented by December, the central banker said.
The central bank raised its export development fund to $5 billion against the previous amount of $3.5 billion to make available more funds for export-oriented businesses. So far Tk 9,000cr has been distributed.
Clients of all stimulus packages will have to repay the loans within a year, which will create a crisis in the financial sector in the days ahead, said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.
The slow economic recovery has indicated that the financial sector will be unable to pick up fully within seven to eight months, he said.
So, both the central bank and the government should extend the repayment tenure, or else defaulted loans in the banking will escalate, he said.
The government will have to give a subsidy of around Tk 3,500 crore to execute the stimulus packages.
The central bank and the government should immediately address the problems that have created a roadblock for the implementation of the packages, said Zahid Hussain, a former lead economist at the World Bank’s Dhaka office.
“In Bangladesh, the SME sector is largely considered as an informal sector. So, proper initiatives are needed to disburse loans to small businesses as they are the growth engines for the country,” he said.
In Bangladesh, SMEs account for 20 per cent of the GDP, 80 per cent of the total industrial employment and 25 per cent of the labour force.
The Covid-19 pandemic has threatened the existence of 2.5 million SMEs in Bangladesh, according to the International Labour Organisation.
The central bank has introduced a credit guarantee scheme for the loans going to the SMEs. Now banks hope it would accelerate the credit flow.
The number of clients is higher in the SME segment compared to the large borrower segment, said Emranul Huq, managing director of Dhaka Bank.
For example, Dhaka Bank has been given the task of disbursing Tk 758 crore as large loans. The number of its clients in the segment is 257.
But it has got the job to give Tk 250 crore in SME loans. Some 3,100 clients of the bank are eligible for the loans.
“We are trying to speed up the disbursement,” Huq said.
According to Huq, banks face challenges in availing the right information and data from SME clients. In most cases, clients don’t have records and now many of them don’t have a clear idea about how to make a comeback.
“So, it takes time to process an application. We have to verify the information because, at the end of the day, banks would bear the credit risks. If we don’t have proper information about the clients, due diligence would not be maintained.”
Dhaka Bank would disburse all large and SME loans by October 31, he said.
A managing director of a private commercial bank said banks are extra cautious in giving out loans this time.
“Although our economy is recovering, there are uncertainties at home and abroad. This additional cautiousness aims at keeping the health of banks sound and ensuring that they get back the loans.”