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Bangladesh Bank has disbursed only Tk50 crore to help reopen closed factories under its Tk62,000 crore stimulus fund, four months after announcing the initiative to revive industries, create jobs and boost economic activity.
The slow pace of lending has raised concerns about whether the fund can achieve its objectives, with less than Tk1,000 crore reaching borrowers directly despite total disbursements of nearly Tk10,000 crore.
The central bank is now considering easing loan conditions and lowering interest rates to speed up disbursement and help struggling businesses resume operations. It is holding discussions with economists, business leaders and former bankers on possible changes to the scheme. A new 180-day action plan to revive the economy is also under consideration.
Bangladesh Bank initially announced a Tk60,000 crore stimulus package in May before increasing it to Tk62,000 crore. Loans to industrial entrepreneurs under the scheme carry a maximum interest rate of 7 per cent.
The fund was designed to support the reopening of closed industrial and service-sector establishments, small and medium enterprises, agriculture, the rural economy and export-oriented businesses. The target is to create employment for 25 lakh people.
Of the total allocation, Tk41,000 crore is to be disbursed from banks' own funds, while the remaining Tk21,000 crore is to come through Bangladesh Bank's refinancing programmes.
Banks have set aside Tk20,000 crore from their own funds to help closed industrial and service-sector establishments resume operations. A further Tk5,000 crore has been allocated for cottage, micro, small and medium enterprises, Tk10,000 crore for agriculture and the rural economy, Tk3,000 crore for export diversification and another Tk3,000 crore for establishing agriculture-based centres in the northern region.
Under the refinancing component, Tk7,000 crore has been earmarked for pre-shipment finance and packing credit, Tk5,000 crore for cottage and small industries through the Palli Karma-Sahayak Foundation, Tk2,000 crore for frozen shrimp and fish exports, and Tk2,000 crore for the leather and footwear export sector.
The scheme also includes financing for overseas employment, job opportunities for unemployed people, rural economic activities and environmentally friendly initiatives. Separate allocations have been made for start-ups and the creative economy.
Despite the wide range of planned interventions, Bangladesh Bank data show that less than Tk1,000 crore of the nearly Tk10,000 crore disbursed by last month had reached borrowers directly. No loans had been disbursed from the allocations for small and medium enterprises, the northern region's economy and agriculture.
Banks' reluctance to take risks has emerged as a major obstacle to faster disbursement. With the banking sector already burdened by defaulted loans, lenders are scrutinising applications carefully before approving financing.
Syed Mahbubur Rahman, former chairman of the Association of Bankers, Bangladesh (ABB) and managing director of Mutual Trust Bank, told Prothom Alo that assessing risks was a fundamental responsibility of banks. They also needed to establish whether closed businesses had the operational capacity to restart, he said.
Bangladesh Bank spokesperson Arif Hossain Khan said the fund had been introduced to restore momentum to the economy and that loan disbursement was continuing.
The central bank was discussing with representatives of relevant sectors whether further measures were needed to speed up lending, he said. It recently met leaders of leading business organisations, following earlier discussions with economists and former bankers.
However, proposals for increasing disbursement differ between the parties, according to relevant sources.
Mustafa K Mujeri, a former chief economist of Bangladesh Bank, said low-interest loans should go to eligible entrepreneurs through a proper assessment process.
Releasing funds without adequate scrutiny simply to meet lending targets could create fresh problems for the banking sector, he warned. Rather than putting pressure on banks to disburse loans, the central bank should strengthen monitoring to ensure that the money is used for its intended purposes.
Business leaders, meanwhile, argue that some of the existing conditions need to be relaxed if closed or partially operational factories are to resume production.
They have proposed using independent third parties to assess a company's assets, production capacity, cash flow and ability to repay loans before financing is approved. They have also called for a more flexible approach to borrowers classified as defaulters, arguing that lending decisions should take account of a project's viability rather than relying solely on default status.
Other proposals include special arrangements for removing borrowers' names from default lists and ensuring that a default by one company in a business group does not automatically deprive other companies in the group of banking facilities. Business leaders have also suggested reconsidering the requirement to resolve pending court cases before obtaining loans.
They have further called for the withdrawal of the requirement to deposit 2 per cent in cash to regain default-free status and resume production. Faster loan approval and disbursement, support centres under Bangladesh Bank's supervision, and simpler application and approval procedures are also among their recommendations.
Another proposal is to increase the number of overdue instalments used to classify term loans from three to six and extend the period of policy support for borrowers seeking to regain default-free status.
Showkat Aziz Russell, president of the Bangladesh Textile Mills Association (BTMA), said reopening closed factories was essential to reviving the economy.
Building new factories could take several years, whereas existing facilities could be brought back into operation in a much shorter time, he said. Business leaders have therefore called for some lending conditions to be relaxed so that more companies can access the stimulus fund.
The package was intended to bring closed industries back into operation, create jobs and stimulate economic activity. But with only a small portion of the money reaching borrowers directly and just Tk50 crore allocated to reopening closed factories, questions remain over whether the scheme is delivering the intended results.
The challenge for Bangladesh Bank is to get funds to viable businesses more quickly without compromising proper risk assessment or allowing the money to be misused.
https://thedailyexpress.news/news/business/1f1c47a8-4a24-6fc0-b5d0-d2b8012b4380