Page 69 - IBT October 2020

Economic Insight
The
Reality
Check
The Covid-19 pandemic has posed
new challenges for the lives of
individuals along with the risk of a
global downturn. Most nations
have been trying to ensure that
their economies do not fall into a
quagmire. However, the challenges
posed by the pandemic in
developing nations like Bangladesh
are more complicated as a
significant portion of the populace
face economic vulnerabilities.
Who is really
responsible for
the Covid
induced
inequality?
The picture at a
By Md. Nafis Khan
glance
The blow was very sharp for small
and medium enterprises, exporters,
and farmers of the country. Soon
after the virus set its foot on the
shores of the country, Prime
Minister Sheikh Hasina announced
stimulus packages and
pre-shipment credits worth Tk
106,117 crore to tackle the
economic downturn brought on by
the pandemic, of which Tk 20,000
crore was meant for SMEs and Tk
5,000 crore for agriculture sector.
The responsibility was given to the
country's scheduled banks.
However, due to lack of central
bank’s initiatives and banks’
negligence, the disbursement has
been going out at a snail’s pace.
As of August 31, only 17.5 and
9.53 percent of the relief packages
meant for SMEs and the
agriculture sector respectively have
been executed. Moreover, whether
the loans have reached the
targeted people is yet unknown to
the central bank. However, there
seemed to be no reluctance in
executing the package announced
for large industries and service
sectors. The rate of interest on the
loan for these industries were also
set at only 2 percent.
A higher number of workers in the
SME and agriculture segment were
traded off for more profitable
business with a large borrower
segment. A statistic might make
the scenario clearer. Dhaka bank
has been entrusted to disburse Tk
758 crore as large loans to only
257 clients, while 3,100 clients
have been enlisted as eligible for
SME loans worth Tk 250 crore. A
report by the International Labor
Organization mentions about a
total of 2.5 million pandemic
affected SMEs in Bangladesh.
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Incentive packages Has the government
announced been idle?
government to provide support and gap from both sides of the story. In
The responsibility now rested on the
The government acknowledges the
assistance to these marginalized
response to it, discussions are
sections. As such, it was ruled that Tk
underway with the World Bank to
3,000 of the newly announced package
implement a credit guarantee
for SMEs would be given to cottage and
micro enterprises in rural areas. Since cover up some uncertainties on
scheme worth Tk 5,000 crore to
they were previously out of the banking
lenders’ end. Government has also
decided to form a steering
channel, loans would be given only upon
fulfilling specific requirements. Women
committee in each district under
the leadership of the deputy
entrepreneurs were also eligible for at
least 5 percent of the package.
commissioner to foster
Government will also provide interest district-level loan disbursement.
subsidies to beneficiaries. It will be
Previously, banks were required to
apply for the loan to the central
responsible for 5 percent of the declared
bank after shipment of exported
9 percent interest for a maximum of one
goods, despite exporters’
year. To prevent defaulting, banks will
assessment of applicant’s current
the shipment. This would cause
wages were disbursed within time.
provide loans only after painstaking Tk 7,700 crore meant for paying willingness to avail loans before
unnecessary delay and hinder
financial condition, previous record, and
bank-client relationship. While the SMEs, farmers and activities in the exporting sector.
Due importance was also given to the exporters are going through To smoothen the implementation
farming sector which received an shortage of funds, large industries of the stimulus scheme, the central
incentive package worth Tk 5,000 crore. and service sectors have been given bank ruled that banks will have to
Under this stimulus package, farmers are the lion’s share. Perhaps, unlike the apply for loans to the central bank
required to pay a maximum of 4 percent story about the Tortoise and the within seven days after they fund
interest on loans taken. The loan will be Hare, this time the Hare will win export sector clients.
valid for 18 months, with a 6-month the race. Why would they not?
grace period. On the other hand, the After all, they have bagged all the
country's export sector received stimulus support from the lenders. As of Who is responsible-
packages in the forms of pre-shipment now, this section of the economy virus or us?
credit and workers’ salary package. has received 72.85 percent of the If I had a fortune teller in front of
Tk 30,000 crore worth fiscal me right now, I know for sure
lifeline allotted for them. what I would have asked. ‘When
The truth will the pandemic end?’ But
An insight into the having a fortune teller seems like
behind the veil a distant dream now, as social
The figures look quite satisfactory. These reasons distancing is still a must. But as a
all point towards a swift recovery from What could the reason behind this nation, the timeline of the
the economic slough as long as the real discrepancy be? Lending money to pandemic should not be our key
picture stays behind closed curtains. small and medium enterprises concern. Rather proper
Despite repeated notices to banks and involves high acquisition and implementation of policies to
non-bank financial institutions to maintenance costs to avail proper make sure we secure our future as
disburse the fund for SMEs by October, information and data. Many SME much as possible should be the
so far only Tk 4,120 crore has been
clients also lack proper strategies first task at hand. The V-shaped
received by 11,183 borrowers. The for a comeback, which entails economic recovery will turn into
deadline for loan disbursement among credit risks for banks. This section reality only if roadblocks to an
farmers has already been crossed. But of borrowers does not have the equal and effective
only a little more than 20 percent of the collateral or organizational implementation of all financial
total package has reached the prime strength to materialize schemes is addressed. Otherwise,
drivers of our economy. The exporting transactional relationship with inequality would slowly corrode all
sector has been a little lucky in this banks. On top of it, the recent flood the progress we have made so far.
regard. Although the current figure of worsened the situation, as many The question we need to ask
pre-shipment credit disbursement stands small-scale farmers felt the ourselves is: ‘who is responsible
at an unsatisfactory level of Tk 1.1 crore absence of enough capital to pay for the newly created inequality?
out of Tk 5,000 crore announced, all of back loans in time. Is it us or is it the virus itself?’