'Burdened with default loans, banks now dread lending CMSMEs'

Many of the banks burdened with large amounts of default loans act like a burnt child dreading the fire to lend cottage, micro, small and medium entrepreneurs, widely known as CMSMEs, participants at a seminar at the National SME Product Fair in the capital's Bangabandhu International Conference Centre said Sunday.

"Defaulted loans of the country's banks are now so high. Amid such a situation, we are even afraid to give loans to small entrepreneurs," said Syed Mahbubur Rahman, managing director of Mutual Trust Bank.

"How will we lend anyone? We have lost confidence. Even in the case of small loans, we have to think again and again whether we will get back the money."

The former chairman of the Association of Bankers Bangladesh further added that large borrowers are taking advantage. "What is more, we face obstacles to realise these loans."

A big problem for banks is that large companies take loans but do not repay on time. Power sector companies are a case in point, he explained.

In contrast, SME loans should be based on cash flow, Syed Mahbubur Rahman said, adding that it, however, is not happening now.

"The struggle for small-scale entrepreneurs to get bank loans in the current situation has increased considerably than in the past. Mounting default loans by large borrowers may be one of the key reasons," said SME Foundation Chairperson Md Masudur Rahman.

CMSMEs now face a lot of obstacles to manage proper documents, collateral and guarantors to get a small loan, he said, adding that women entrepreneurs, particularly in rural areas, suffer the most.

"Therefore I would request authorities concerned to ease the lending process for CMSMEs and prioritise marginal entrepreneurs, especially those working out of the capital."

Speaking as the chief guest, Planning Minister MA Mannan said guaranteeing loans for CMSMEs is a great pain.

"I will urge the government to be their guarantor.  Such entrepreneurs have no headaches with interest rates. They need loans without delay. But when they go to take loans, banks show them many formalities. This should not happen."

The 10-day National SME Product Fair is going on in full swing, with entrepreneurs getting good responses from visitors.

SME Foundation Managing Director Md Mafizur Rahman told The Business Standard that people are more interested in the fair. "As the quality of products made by our entrepreneurs is good, visitors are happy."