Small enterprise re-financing scheme

This commendable initiative of the government, for the first time, is one of the visionary endeavours to regenerate the growth of SME for balanced economic development contributing much to GDP.

It has indicated that a loan of Tk 2.00 to Tk 50.00 lakh will be given through schedules banks to small enterprises to be re-financed by Bangladesh Bank to the schedule bank at the prevailing bank rate.

Undoubtedly, such kind of fiscal measures are required to ensure the millennium development goal and reduce the poverty level by half within 2015 AD. Unfortunately, the scheme as announced needs few modifications to attain its objectives as follows:-

1) It has been stated that the industry and business enterprise having Tk. 1.00 crore as assets will be defined as "Small Enterprise". There is however, doubt whether an organisation, having such an amount of asset may be interested to take Tk 2.00 lakh as loan.

2) The salient features do not cover all enterprises involved in agricultural sector or engaged in off-farm activities.

3) The rate of interest to be charged should have been specific. It has been stated that refinancing by Bangladesh Bank to scheduled banks will be at the prevailing bank rate. But there should have been a binding clause that no scheduled bank will demand service charge of more than one per cent to make it attractive and thus, confine the rate of interest to less than six per cent.

4) As regards the collateral security, the circular is silent. It means that the Bank may demand security of Tk 1.00 crore for the loan of Tk 2.00 lakh only which will surely discourage the small enterprises to come forward to avail the opportunities of this scheme.

5) For processing such a small loan, schedule banks may not be interested and therefore, there should have been some obligatory instructions from the central bank to this effect.

6) The objective of this scheme is to support and safeguard the marginal and small enterprises as safety net. Unfortunately, the salient features did not entail any clause to protect the small enterprises in case of any default in payment.

In fact, our goal is poverty alleviation by ensuring macro economic stability in the country. This scheme should look into this vision more seriously to make the advances fully utilised in letter and spirit.