In addition to extending the loan disbursement period of the incentive package announced by the government for them, it is also necessary to give them at least 2 years to repay it, say experts
Experts at a workshop in Dhaka on Sunday called for enlarging the government's stimulus package as well as extending both the loan disbursement and recovery periods in order to deal with the second wave of Covid-19.
They have also urged the government to rely not only on incentives but also increase demands for products to protect the industrial sector, especially the cottage, micro, small and medium enterprises (CMSMEs).
At the event titled "Contribution of SMEs for the Economic Development of Bangladesh: A Post Covid-19 perspective", experts have said about 60% of products produced in the CMSME sector remain unsold in warehouses due to a decline in the demand amid the pandemic. Besides, many entrepreneurs have already run out of capital as cash flow has stopped.
Joining the workshop virtually organised jointly by SME Foundation and Economic Reporters Forum (ERF) at the former's office, Dr Atiur Rahman, former governor of the Bangladesh Bank, said loan conditions for small and medium entrepreneurs need to be relaxed.
In addition to extending the loan disbursement period of the incentive package announced by the government for them, it is also necessary to give them at least 2 years to repay it, he also said.
It needs to be extra cautious so that the second wave of Covid-19 does not devastate the economy, he went on saying.
"We should try to keep the informal economy afloat and keep shops open in compliance with the health rules. The industrial sector also needs to be kept operational."
He said the biggest problem in the current situation is a decline in the demand. In order to protect the industry, the demand for their products as well as consumption should be increased by taking necessary fiscal initiatives.
Dr Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue (CPD), a research institute, said the SME sector in Bangladesh is never considered a key driver of economic growth.
But many countries have ensured their development through the development of this sector. Even in developed countries, the SME sector accounts for 80% of industrial employment, he said.
Moreover, SMEs can play a big role in the supply chain by providing raw materials to large industries, he added.
By increasing their capacity, SMEs should be made capable of competing with big corporations and even in the global market, he suggested.
Speaking as the president of the workshop, SME Foundation Chairperson Prof Dr Md Masudur Rahman said the demand for loans in the SME sector has almost tripled in the last one decade but it is not met due to various problems in the banking channel.
In this situation, it needs to emphasise looking for an alternative financing framework for financing small companies, he also said.
"Big industries get more incentives when they are in danger. Apart from this, they also get different other opportunities, including export incentives, loan rescheduling and interest waiver, throughout the year. But small industries are lagging behind due to lack of these privileges."
The professor further said capacity building is most needed for small organisations.
He said small businesses would be at a greater risk if their access to technology transfer, manpower skills development, innovation and market are not enhanced.
Shams Mahmud, president of the Dhaka Chamber of Commerce and Industry (DCCI), said there is no convenient linkage policy which could prioritise the SME sector in procuring raw materials for large industries.
He said a large amount of VAT and taxes apply when raw materials are procured from any domestic factory but there is an opportunity to import the same materials from abroad free of cost.
Presenting the keynote address at the event, Dr Nazneen Ahmed, senior research fellow of Bangladesh Institute of Development Studies (BIDS), said institutions like SME Foundation should be used, alongside banks and financial institutions, to disburse loans to SME entrepreneurs.
ERF President Sharmin Rinvi, Vice-President Shafiqul Islam, General Secretary SM Rashidul Islam and SME Foundation Managing Director Md. Shafiqul Islam also spoke at the workshop.