Like Rahela, the SME Owners Association of Bangladesh President Md Ali Zaman also said that the budget has failed to address the needs of micro, small and medium enterprises (MSMEs)
The business of Shishir Handicrafts at Gazipur was hit hard by the ongoing coronavirus pandemic.
The owner of the small enterprise, Rahela Parveen Shishir, told Dhaka Tribune she was forced to shut her business for the last three months due to reduced demand, disrupted supply chains and worsening access to finance and marketing.
“I have 15 regular employees, and also some people were involved with my factory on daily-basis. I suffered from a liquidity crisis to pay their salaries and my factory's utility bills. I was forced to reduce my manpower.”
“As I am a small entrepreneur, I barely have access to bank loans. When I went to the bank for loans, they imposed a number of conditions, which was impossible for a small entrepreneur like me to meet.”
Asked about getting bank loans at reduced interest rate, as part of the government's stimulus packages for recovering from the coronavirus fallout, Rahela said that the bankers were very reluctant to provide the loans.
“I think, rather than loans, the government should subsidize us with cash money,” she commented.
Like Rahela, the SME Owners Association of Bangladesh President Md Ali Zaman also said that the budget has failed to address the needs of micro, small and medium enterprises (MSMEs), while most small businesses were enduring tough times.
More than two months have passed, but the SMEs hardly received stimulus loans declared by the government, he lamented.
Asked about the budgetary measures for the SME industry, the business leader simply replied "Ghorar Dim" (grand sum of zero in Bangla.)
However, Finance Minister AHM Mustafa Kamal said in his budget speech that the government has taken special measures for the protection of small and medium enterprises (SMEs).
Considering the development of SMEs, he said the Prime Minister had declared light engineering as the ‘Product of the Year’ for 2020.
“In light of the recommendations given by the SME Foundation, I have proposed to reduce tax rate on import of some of the raw materials used in the production of SME products,” he said during his speech.
“Duty and taxes on import of some products (e.g. nails, screws, small machinery parts, etc.) have been proposed to increase to protect SMEs,” he added.
The finance minister also proposed to increase the current duty rate on importing honey in bulk to 25% from 15% in a bid to protect the local and indigenous honey farmers.
Mixed bag of reactions
Several leaders of cottage, micro, small and medium enterprises (CMSMEs) and sector experts have reacted positively to the budgetary measures taken by the government, but they expressed concern over the execution of the measures.
Mirza Nurul Ghani Shovon, president of the National Association of Small Cottage Industries of Bangladesh (NASCIB) said, “We welcomed the budgetary measures. Now we want quick disbursement of funds from the stimulus package. On April 5, the Prime Minister Sheikh Hasina declared a financial assistance package of Tk20,000 crore as a working capital loan for CMSMEs. But banks are not disbursing the money. That’s why, after two months of the declaration, the same commitment came through the budget speech.”
“We want the money to be released as soon as possible for entrepreneurs. The government should focus on this immediately,” he urged.
"Moreover, the small entrepreneurs want a 2% loan rescheduling facility for the next 15 years. It will ensure access to finance for us as well as the bank’s turnover," he added.
The government should reduce VAT from 15% to 5% for the sector, Mirza also suggested.
Talking with Dhaka Tribune, leading woman entrepreneur and Lawmaker Prof Dr Masuda M Rashid Chowdhury Saima also hailed the government's initiative in the form of stimulus packages.
“Among the CMSMEs, almost all women entrepreneurs are hit hard by the Covid-19 pandemic. Disbursing the loans should be top priority,” she said.
“The marginal entrepreneurs, who have limited access to banks, are very vulnerable right now. To ensure access to finance for them, the government could disburse the stimulus packages through local businesses bodies,” she suggested.
“Budget means not only allocation of money, but also providing policy support. For the CMSMEs both the budgetary measures and policy support were taken by the government,” Bangladesh Institute of Development Studies (BIDS) Senior Research Fellow Nazneen Ahmed told Dhaka Tribune.
“If the government really wants to give relief to the CSMEs, the execution of the Tk20,000 crore stimulus package has to be implemented immediately. Here the government also must ensure that real businesses get the facilities, especially all the women, cottage and micro entrepreneurs,” she remarked.
“Besides, the government increased duty on import of some finished goods and reduced duty on raw materials, which indirectly benefited the local CMSMEs. However, owners of beauty parlors will face difficulties because of increased taxes on cosmetic items,” she also said.
“The income tax exemption ceiling for individuals and women raised by Tk50,000 will also help the SMEs. But the CMSMEs still have to pay double taxes in many cases, as the tax system is not yet automated,” Nazneen added.
According to government statistics, over 7.8 million SMEs are contributing to 25% of the country’s GDP. The government had planned to enhance the contribution of this sector to 32% by 2024 with a view to generating more employment.