‘PM’s allocation to SMEs will help overcome drought of cash flow’
Peoples Time Desk
The prime minister announced a fund of Tk20,000 crore for SMEs as working capital
Welcoming the prime minister’s bailout package of Tk20,000 crore for Small and Medium Enterprises (SMEs), the leaders of the business community have said it will help to overcome the drought of cash flow in the sector.
In instant reaction on Sunday, they urged the concerned authorities to keep the interest rate at 2% instead of 4% for the sake of the SME sector, the mother of industrialization.
Earlier in the morning, Prime Minister Sheikh Hasina announced a total incentive package of Tk72,750 crore to overcome the possible economic impact on the country due to the outbreak of the novel coronavirus.
Under the package, the prime minister announced a fund of Tk20,000 crore for SMEs including cottage industries as working capital.
The interest rate of this lending facility will be 9% and the concerned industries and business organisations will pay 4% interest in that loan, while the government will provide the remaining 5%, said the prime minister.
“In most of the cases, small and cottage entrepreneurs run their business with their own fund and the working capital is very small,” National Association of Small and Cottage Industries of Bangladesh (NASCIB) President Mirza Nurul Ghani Shovon told Dhaka Tribune.
But these entrepreneurs are now struggling to keep their businesses running as their sales downed drastically due to the countrywide lockdown, said Shovon.
Since the sales fall drastically, the sector is going through a cash crunch. In such a critical moment, the prime minister’s allocation of fund for the working capital will increase cash flow to the sector, economists and business people opined.
Shovon also urged the government to spread the coverage of the fund to district level for better effectiveness of it.
In her speech, the prime minister said a mechanism would be devised to disburse the amount to the SMEs as low-interest loans through banks on the basis of bank-client relations.
The government, in this case would bear the greater share of the interest amount, she added.
However, economists opined that this is a good and timely initiative that the government separately think about the SMEs sector, which is badly needed.
As SMEs sector employs a large number of people, it needs special care, Policy Research Institute (PRI) Executive Director Ahsan H Mansur told this correspondent, adding: “Due to coronavirus pandemic, the sector has suffered. So, financial support with a low interest rate will ease the running of the business.”
But the government should ensure that the fund reaches to the entrepreneurs of the SME sector, and only through this, it will be able to contribute to the economy as well as the sector would be able to fight with the coronavirus fallout, he added.
Dr Ashikur Rahman, senior economist at PRI, also told Dhaka Tribune: “The decision to channel cheap loans amounting to Tk20,000 crore to SMEs was absolutely crucial.
“It will allow them to pay their expenses for the next few months protecting their capital, so that they can keep investing in economy. It was fundamental as such shocks usually are more regressive on the SMEs as it dilutes their capital base.”