Support SMEs for swift economic recovery

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The SME Basis yesterday called for the extension of credit facilities to small and medium entrepreneurs on easy conditions to help them donate to economical recovery amid the coronavirus pandemic.

The plea made at the 14th total annual general meeting of the foundation came as the World MSME Day was observed around the world yesterday, so that you can raise public awareness about the contribution of the cottage, micro, small and medium enterprises (CMSMEs) to sustainable advancement and the global economy.

The Covid-19 pandemic has threatened the existence of 2.5 million SME's in Bangladesh, which employ 40 % of the labour force with a GDP contribution of 25 per cent, in line with the International Labour Organisation.

Smaller businesses, including those run by women and young entrepreneurs, are being hit hardest by the economic fall-away of the pandemic. Unprecedented lockdown actions enacted to support the pass on of the coronavirus possess resulted in supply chain disruptions and a massive drop in demand in most sectors, the US said.

"Let's not forget these enterprises, which generally make use of less than 250 persons, will be the backbone of all economies worldwide and take up an integral role in growing countries," it said on its website.

"Economic recovery wouldn't normally be sustainable without giving importance to the SME and agriculture sectors," Atiur Rahman, a past governor of the central bank, told The Daily Star yesterday.

The government has announced a Tk 20,000 crore stimulus package to greatly help the CMSME sector get over the coronavirus fallout. Which, Tk 10,000 crore will be provided by the central bank under a refinancing scheme.

Commercial banks may charge a maximum interest rate of 9 % for the loan. Even so, it could cost 4 per cent for the CMSMEs as the federal government would bear 5 per cent of the interest as a subsidy.

"But I think the complete Tk 20,000 crore should be lent under a refinance scheme," Rahman said.

Rahman said banks are worried about risk management, as a result they may not prefer to lend to new borrowers and would prefer to may remain centered on existing borrowers.

The central bank should implement a credit guarantee scheme to greatly help banks lend to the vulnerable CMSME sector, he said.    

A partnership can be formed with microfinance institutions (MFIs) to implement the stimulus package deal because the MFIs find out CMSMEs better, the former governor said.

Based on the Rapid Assessment Study 2020, conducted by the Centre for Insurance plan Dialogue, a majority of enterprises surveyed have observed a high level of adverse impact on production (about 42.9 %).

The government must think about additional measures to make certain that SMEs are actually in a position to draw benefits from the stimulus package, the CPD said in a paper recently.

Tk 20,000 crore is a great starting point and the amount would need to be increased found in the days to arrive, Ahsan H Mansur, executive director of the Coverage Exploration Institute of Bangladesh, explained recently.

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