Better than expected CMSME loan recovery despite the pandemic

With the surge in credit growth in the Cottage, Micro, Small & Medium Enterprises (CMSME) sector, the amount of loan recovery also increased in 2021.

The Covid-19 pandemic shuttered businesses for much of the year, but small businesses managed to repay 77.68% of the target’s loans.

In 2021, recoverable loans in the CMSME sector stood at Tk 2,21,78 crore. Out of this amount, the borrowers repaid Tk 1,71,730 crore.

Although the recovery percentage decreased from 2020, the recovery amount increased by Tk 21,955 crore in 2021. Loan recovery in this sector stood at 87.51% in 2020.

According to stakeholders, loan recovery in the CMME sector was satisfactory in 2020 as the pandemic hit the country in March of that year. It took three more months to affect the companies.

But in 2021, traders have had to deal with the Covid fallout from the previous year. Even after that they managed to pay a little less in percentage, but in quantity it was better than expected.

At the end of December 2021, CMSME sector loans stood at Tk 2,15,786 crore including defaulted loans, or 18.63% of total loans across all sectors.

Loan recovery in the CMME sector was 56.43% in 2017, 70.11% in 2018 and 72.13% in 2019.

Asked about this, Syed Mahbubur Rahman, Managing Director and CEO of Mutual Trust Bank Limited, told The Business Standard: “The loan recovery rate in the CMSME sector is comparatively better than that of large loans in our country. Customers in this sector take short-term loans and traders also try to repay in due time. »

“The pandemic hit the country in early 2020, but its impacts were felt much later in the first six months of 2021. However, businesses tried to gradually recover in the second half of 2021. As a result , most borrowers were able to make repayments,” he said.

According to central bank sources, loan disbursements to the CMSME sector were Tk 1,53,496 crore in 2020 and Tk 1,85,428 crore in 2021. Thus, one-year loan disbursements increased by 20.80%.

Loan disbursements were Tk 167,970 crore in 2019. So, compared to 2020, disbursement decreased by 8.6%.

A senior central bank official, speaking on condition of anonymity, said many small businesses that suffered losses during the pandemic received incentive loans. But they are not as active in repaying incentive loans as they are in repaying normal loans. Otherwise, overall loan recovery would have been much better. In addition, disbursement in the second phase is also low due to low collection of incentive loans.

According to sources, the total number of companies in the CMSME sector stood at 7,85,858 in 2020 and soared to 9,49,131 companies the following year. At present, the number of new enterprises receiving loans has increased to 1,53,273, an increase of 19.50% in one year.

Additionally, the number of women-led businesses in 2021 increased to 83,268.

Some 18,218 new entrepreneurial organizations in 2020 received loans of Tk 1,38,572 crore and 25,691 new entrepreneurs got loans of Tk 1,83,928 crore in 2021. As a result, loans and number of entrepreneurial institutions increased of 41.02% and 32.73% respectively.

Meanwhile, loans categorized under the SME sector in 2021 stood at Tk 36,295 crore, an increase of 17.65% from the previous year. Currently, the amount of defaulted loans in the SME sector is 14.40%.

Meanwhile, the financial sector aims to increase the ratio of CMSME loans to women entrepreneurs to total CMSME loans to 15% by 2024, but only 4.08% of total CMSME loans have been disbursed. among women last year.

In 2021, female-led CMSMEs received Tk 8,801 crore in loans, which is 6.76% more than the Tk 8,244 crore received in the previous year.

According to the central bank, small entrepreneurs obtained the highest share of 55.22% of CMSME loans in 2021, followed by medium-sized enterprises with a share of 33.41%. The loan disbursement rate was the lowest, 0.82%, for cottage industries.

The government has declared a Tk 20,000 crore stimulus loan scheme to help CMSMEs weather the financial shock due to the Covid-19 pandemic.

In the first phase, the loan disbursement rate was 77% of the target in eight months (July-February) during the last fiscal year.

In the second phase, banks disbursed Tk 71.17 billion in loans to CMME sector businesses in the first eight months of the current fiscal year (July-February), or 36.80% of the target .

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