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SME stimulus way lower than regional peers

The government’s allocation for helping small and medium enterprises (SMEs) overcome the pandemic-induced losses is far less compared to the funds set aside for the same purpose in India, Thailand, and Malaysia, says a recent study.

The findings of the study titled “The Future of SMEs after the Coronavirus Crisis: Challenges and Opportunities” were revealed Tuesday at a webinar jointly organised by the SME Foundation and Friedrich-Ebert-Stiftung, Bangladesh.

As per the report, India allocated a total of 38 percent of its total Covid-19 stimulus funds for the SME sector while it was 33 percent in Thailand and 24 percent in Malaysia respectively.

On the other hand, Bangladesh’s allocation is just 22 percent.

Considering the situation, speakers suggested that the government should increase the amount of incentives for SMEs and pay special attention to the sector.

“The revenue of the local SME sector has fallen by 66 percent due to the ongoing coronavirus crisis as 76 per cent of their products remain unsold,” said Atiur Rahman, former governor of Bangladesh Bank.

Besides, 42 percent of those employed by SMEs are receiving partial payments while 4 per cent have not been paid at all, he added.

With this backdrop, the former central bank governor suggested that at least Tk 20,000 crore more should be allocated to help SMEs recover from the Covid-19 fallout.

Experts came up with a number of other recommendations in this regard, including the implementation of SME Policy 2019, cluster-based SME development, credit disbursement process verification initiatives, creation of digital dashboards, and development of bank-customer relations, giving priority to export oriented SMEs, women-entrepreneurs, and eco-friendly SME institutions.

Citing the study, Rahman pointed out a number of major challenges for the growth of local SMEs. This includes the fact that less than one-third of the sector’s workforce are women, half of the enterprises are located around just two cities, lack of pre-determined access to government procurement for SMEs as well as formal financing due to high lending rates and strict requirements.

“SMEs are a driving force of Bangladesh’s economy and since the sector has been severely affected by Covid-19, the government is already working with them to help overcome the losses,” said Zakia Sultana, secretary to the Ministry of Industries.

The capacity of the SME Foundation needs to be increased to spur the sector’s development while structural and policy reforms need to be carried out at the same time, said Md Masudur Rahman, chairperson of the SME Foundation.

Md Mafizur Rahman, managing director of the SME Foundation, said the sector accounts for 25 per cent of the country’s GDP and employs almost eight million people.

M Abu Eusuf, professor of the department of development studies at the University of Dhaka; Nazneen Ahmed, country economist of UN Development Programme, Bangladesh; and Muhammad Shahadat Hossain Siddiquee, professor of the department of economics at the University of Dhaka, also spoke at the webinar among others.

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