Only those who are hardly hit and whose financial transaction record is good should get loans
Prime Minister Sheikh Hasina has recently announced to reach out to the poor with food and said no one will starve. That is a big part of the government announced support programmes. There is no scope for negligence here.
The government needs to roll out big initiatives to materialise the mammoth task of implementing the declared incentive package. The level of corruption and irregularities will have to be brought down. Also, different voluntary organisations will have to be involved in this process.
The incentive announced for large industries and service sectors to bring the economic activities back to life is right to a great extent. However, caution should be exercised to make sure that the habitual loan defaulters cannot take advantage of this.
The habitual defaulters are usually politically influential. They will try to take out loans from this fund. Once they get the chance, they will take it all. So, those who do business following rules and have a genuine business will be in trouble.
To make sure that the true objective of the announced package is achieved, willful defaulters will have to be kept away from the package. Only those who are hardly hit and whose financial transaction record is good should get loans.
Also, there are some loopholes in the banks' relations with their clients. Many subscribers take out loans from banks and instead of paying them back, they reschedule their loans repeatedly. These people will have to be kept outside the purview of the fund.
There is a liquidity crisis in the banking system now which will worsen in future. So, arrangement has to be made for excess liquidity by quantitative easing (by printing banknotes) through the Bangladesh Bank.
As many small businesses lack the cash reserves and credit that is typically available to large companies, they are often highly vulnerable to pandemics like Covid-19. So, only incentives for the small industries will be enough.
Three types of initiatives will have to be taken for this sector. Firstly, the existing loans for the Small and Medium Enterprises (SMEs) will have to be formalised. Secondly, the SMEs will have to be provided with some working capital too.
And in future, the small investors will face the hardest of the difficulties in paying the rents of factories and office premises. This is because almost all of the small businesses are being operated in rented houses. The rent payments need to be cut by half for the next three months.
The economy will be in trouble if small businesses like salons, shops and small factories are forced to shut down for failing to pay rents. If the prime minister makes an announcement about this, the house owners will surely accept it. They will not suffer big losses by doing this.
The author is the executive director of Policy Research Institute and chairman of Brac Bank.