Stimulus for small businesses, farmers raised to Tk 10,000cr

The government has decided to expand the size of a fresh stimulus package for small traders, entrepreneurs and farmers to Tk 10,000 crore as they were largely left out of credit support despite being hit hard by the coronavirus pandemic.

On January 17, the government approved a new package amounting to Tk 1,500 crore for small traders, entrepreneurs and farmers, who have no access to finance from banking channels.

Now, the government plans to raise it by Tk 8,500 crore as various state agencies that disburse funds among small borrowers are seeking more funds, said an official of the finance ministry.

The banking division is now formulating a new guideline on how to disburse the fund.

Earlier, the division prepared a guideline for the Tk 1,500-crore fund, and it was forwarded to the cabinet for approval.

At the time, the interest rate was set at 4 per cent.

The lenders will take this interest as a cost of transaction and the interest rate can’t be more than 4 per cent, Finance Minister AHM Mustafa Kamal told The Daily Star last month.

The lending rate may remain unchanged for the Tk 10,000-crore fund, said the official of the finance ministry.

Various government and semi-government agencies such as the SME Foundation, the Bangladesh Small and Cottage Industries Corporation, the Palli Karma-Sahayak Foundation (PKSF) and Bangladesh NGO Foundation will get funds from the package to infuse dynamism into the rural economy amid the ongoing coronavirus pandemic.

Micro-businesses and farmers that can’t take loans from banks since they fail to provide the necessary documents will get funds under the package.

Joyeeta Foundation, the NGO Foundation, the Social Development Foundation, the Palli Daridro Bimochon Foundation, the Small Farmers Development Foundation, and Bangladesh Palli Development Board will get funds from the package to disburse those to the recipients.

Earlier, the PKSF received Tk 500 crore to disburse among the micro-businesses, entrepreneurs and farmers under the stimulus package.

It has already disbursed Tk 250 crore and is in the process of distributing the rest.

The state agency has sought Tk 500 crore for the current fiscal year and Tk 1,000 crore for the next fiscal year as part of the package.

The PKSF disburses funds through more than 260 non-governmental organisations.

Only 10 per cent of 304 micro-firms in the manufacturing and services sectors received funds from stimulus packages unveiled by the government, according to the third round of a survey of the South Asian Network on Economic Modeling (Sanem).

The third round covered the October to December period. It was 8 per cent in the July to September period.

“SMEs (from all sectors) should be a priority in channeling the loans and stimulus packages,” the Sanem said in a paper.