CMSMEs Require Continuation of Stimulus Package and Loan Classification Relaxations Amid Second Wave of COVID-19

Cottage, micro, small and medium enterprises (CMSMEs) are the most affected segments in the private sector because of the emergence of COVID-19. In order to minimize the economic impact, the government of Bangladesh announced financial support for various sectors through stimulus packages worth Tk 1.21 million since the end of March 2020. Along with providing loans at low-interest rates, the government also took several steps to ensure breathing space for the private sector. Among these steps, halting loan classification is one of those measures.

Since 19 March 2020, Bangladesh Bank, in different phases, issued circulars on halting loan classification for all kinds of outstanding loans in order to reduce pressure on the private sector, sustain employment in the country and so on. Bangladesh Bank via BRPD circular no. 3 on 31 January 2021 said that the bank borrowers would no longer get the moratorium facility against their outstanding loans from the beginning of the current year. But due to the arrival of the second wave of COVID-19, Bangladesh Bank extended again the policy relaxation involving loan repayments to the country’s scheduled banks by their borrowers. According to the new circular, borrowers can clear their instalments on loans by 30 June 2021. For the loans whose term has expired, the unpaid interest has to be cleared in six quarterly instalments from March 2021 to June 2022. For the demand loans, borrowers are allowed to repay loans within eight instalments from March 2021 to December 2022.

However, these guidelines will not be applicable for the borrowers of the COVID-19 stimulus packages. A significant working capital loan of BDT 20,000 crore was sanctioned for the CMSMEs on 13 April 2020. So far, 72 per cent or BDT 14,360 crore of this loan has been disbursed till 11 March 2021. The deadline for implementing BDT 20,000 crore stimulus package for the cottage, micro, small and medium enterprises (CMSME) sector will not be extended. The time for its implementation will expire on 31 March 2021. There is a possibility that 28% of the fund or BDT 5,640 crore of this fund will not be utilized.

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