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Redesigned 2nd stimulus package critical for recovery of CMSMEs, say experts

  • Published at 08:48 pm June 24th, 2021
Fisherwomen are adopting easy and improved fish drying methods to ear
File photo of fisherwomen adopting easy and improved fish drying methods to earn consumer trust and premium price in Cox’s Bazar Dhaka Tribune

Although the stimulus package announced by the government had sustained the pandemic shock to some extent, the tools surrounding its implementation needs much more focus, specifically in the context of disbursement, they added

The need for a redesigned second round of stimulus package to support the private sector and the cottage, micro, small and medium enterprise (CMSME) sector has become critical, experts said on Thursday.

Although the stimulus package announced by the government had sustained the pandemic shock to some extent, the tools surrounding its implementation needs much more focus, specifically in the context of disbursement, they added. 

They made the remarks at a webinar titled “COVID Stimulus and Links to Employment, Consumption, and Investment: The Bangladesh Experience, Global Lessons, and Priorities for Next Round Support.”

Planning Minister MA Mannan joined the webinar as the chief guest while Business Initiative Leading Development (BUILD) Chairperson Abul Kasem Khan delivered the welcome speech.

Mannan pointed out that Bangladesh’s variables are unique to the economy and should not be compared with other nations. 

However, he did acknowledge the concern in the drop of FDI as reported by UNCTAD.

Abul Kasem Khan said unemployment, demand generation, and savings need to be addressed to make the stimulus packages more fruitful.

According to a study by BUILD and Policy Exchange Bangladesh (PEB), 83% CMSME firms reported that they have not received stimulus relief from the government. 

Of these, 63% said they were unable to pay staff wages along with other fixed costs due to the pandemic.

Other studies have also found uneven and slow progress in stimulus utilization.

According to a recent study by SANEM, about 69% businesses did not get funds from the stimulus package announced by the government to tackle the effects of Covid-19, while 9% were not aware of the packages.

Several factors — gaps in required documentations, discretionary behavior of officials, collateral and guarantor requirements — limit the access of stimulus for the CMSME sector, said Dr M Masrur Reaz, the chairman of PEB.

According to BUILD and PEB, the design of the packages needs to take into consideration the challenges and needs of small entrepreneurs in regards to outreach, prioritization, compliance capabilities as well as working capital support. 

Furthermore, the overall design of the packages missed out on drawing explicit and effective links with employment, the study found.

Masudur Rahman, chairperson of SME Foundation, pointed out that commercial banks have failed to disburse the stimulus package as most of the businesses under the informal sector do not have documentation and collaterals such as that of a trade license. 

Rizwan Rahman, president of the Dhaka Chamber of Commerce and Industry (DCCI) underscored the need for a database, stating that no matter how many or how friendly policies “we come up with, the implementation and disbursement of support will be a problem without a database”. 

He also added that traditional collateral-based methods are not effective and SME foundation and the Bangladesh Bank can develop a merit-based method instead.

Professor Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), also underscored the importance of an accessible database to disburse cash support to the unemployed.

“Cash support has been proven to be very effective in inducing the recovery that we have seen so far. Unfortunately, the proposed budget for FY22 did not introduce a second stimulus package that is much needed,” he added. 

Of the total stimulus packages unveiled so far, 80.7% was liquidity support and credit-based. 

Tuomo Poutiainen, the country director of ILO Bangladesh, speaking as the guest of honour, underscored the importance of social-safety nets in safeguarding the disproportionately affected CSMEs segment of the economy. 

Poutiainen also said access to vaccination, social insurance, and services are crucial to ensure an inclusive recovery approach. 

Among others, Jasim Uddin, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI); Asif Ibrahim, chairman of the Chittagong Stock Exchange; Mahbub Alam, president of Chittagong Chambers of Commerce and Industry (CCCI); Mohammad Jamal Uddin, general manager of the Bangladesh Bank, and Ferdous Ara Begum, CEO of BUILD, spoke at the webinar.

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