Banks slow down stimulus loan disbursement

To ward off Covid-19 shocks, the government has so far announced 28 stimulus packages amounting to over 1.87 lakh crore Tk

16 October 2021, 22:35

Last modification: October 16, 2021, 10:36 PM

Representative image. Illustration: Collected


Representative image. Illustration: Collected

The loan disbursement of the second phase stimulus packages is advancing at a snail’s pace as banks wait for government interest subsidies on the loans they distributed last year.

In the first two and a half months of the current fiscal year, banks distributed Tk 519 crore as a working capital loan between industry and service entities affected by Covid, which is only 7 , 6% of the target for the same period.

The Bangladesh Bank has set a target of disbursing Tk 33,000 crore in the current fiscal year in the sector. Until September 12, only 55 industries took advantage of the benefits.

In the last fiscal year, the government announced a loan package of Tk 40,000 crore for this sector and disbursed 81.75% of the amount among 3,306 companies.

To ward off the shocks of Covid-19, the government has so far announced 28 stimulus packages amounting to over 1.87 lakh crore Tk.

The Bangladesh Bank is directly involved in 10 of the stimulus packages. So far, three packages have been fully implemented and the remaining seven will be implemented during the fiscal year.

According to the latest data, the central bank aims to disburse Tk 20,000 crore as working capital among small and medium-sized enterprises. But only Tk477 crore has so far been disbursed, which is 2.38% of the target.

The central bank has set a target for the Tk 5,000 crore package in the pre-shipment credit refinancing program. The number of beneficiaries of this program so far is 65 business entities which have received a loan facility of Tk 375 crore. The amount is 7.51% of the target.

“The pace of stimulus loan disbursements has slowed because banks have not received the interest subsidy against the stimulus loans,” Dr Fahmida Khatun, executive director of the Center for Policy Dialogue, told The Business Standard.

“Also, as the impact of Covid was greater last year, affected borrowers took more loans. Now the situation with Covid is starting to normalize, so many have cut back on their borrowing.”

In April last year, the Bangladesh Bank issued a separate policy stating that the duration of the stimulus packages would be three years.

If the loans are not collected on time, then they would be considered regular loans from the distributing banks, he added.

The government painted a rosy picture in the loan disbursement of a Tk 3,000 crore refinancing program set up for low-income professional farmers and small entrepreneurs, who received 73.87% of the target just in the two and a half months of this fiscal year.

The Bangladesh Bank has implemented a Tk 2,000 crore credit guarantee program for the SME sector during the current fiscal year. Twenty-seven banks and four financial institutions have already signed agreements with the central bank for the disbursement of Tk 1,900 crore from the target.

During this time, only two trade organizations received Tk28 lakh.

Dr AB Mirza Azizul Islam, financial adviser to a former caretaker government, said: “We have just passed a few months of the new financial year. It would be clear after a while.

“However, many stimulus packages have not been fully implemented, even in the past fiscal year. To fully meet the loan disbursement target, the respective sectors need to be reviewed.”

The government has achieved complete success in two areas. A stimulus loan of Tk 5,000 crore has been allocated to pay wages and allowances for workers and employees in export-oriented industries. This sector has already been fully implemented.

At the same time, the government had set a target of Tk 2,000 crore for interest subsidies on loans disbursed by commercial banks in April and May of last year. This has also been fully implemented.

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