DCCI urges to create emergency fund for micro, small & medium enterprises (MSMEs) for their survival amid Coronavirus outbreak

Business, investment and economic activities are adversely impacted due to widespread outbreak of coronavirus globally. Bangladesh’s economy encompassing export oriented industries and local market orientated manufacturing, agro processing and service industries, micro, small and medium enterprises including trading businesses, transport, hotel, restaurant, grocery and informal sector comprising floating high small traders, shops have already encountered a severe blow appearing from this outbreak. Bangladesh under the leadership of Hon’ble Prime Minister Sheikh Hasina has undertaken timely and laudable measures to restrain the nerve-wracking consequences of this pandemic on businesses as well as public health. Dhaka Chamber of Commerce & Industry (DCCI) profoundly appreciates timely leadership of Hon’ble Prime Minister for pro-economic decisions during this precarious situation and creating a fund of Tk.5000 crore for export oriented industries to support the salary and wages of their workforce. This measure will surely leverage export oriented industries as deferral, cancellation and drying-up of export orders put revenue stream of these industries at risk.

Though Micro, Small and Medium Enterprises (MSMEs) of formal and informal sectors play important roles in driving the growth of the economy and creating employment opportunities, the financial strength of MSMEs becomes fragile. The coronavirus pandemic has substantially impacted MSMEs across all sectors of the economy. Many MSMEs have been passing distressed time due to limited trade and shortage of fund to maintain business operations and pay off salary of the employees and workers which causes unemployment. In a bid to protect the local MSMEs from the serious impact of coronavirus, DCCI urges Government to come forward with some short and mid-term fiscal and non-fiscal recovery policy plans supports to rescue MSMEs.

DCCI requests Government to create a 3-year long Emergency Fund with 1% interest to support the financially stressed local MSMEs and informal sector for paying salary to their workers. MSMEs with turnover TK. 1 crore can get loan with 1% interest and 2% interest for MSMES over 1 crore turnover. Factories located in the BSCIC industrial parks across the country also need to be brought under this emergency fund for paying salary and labour wages. MSMEs should be allowed one year grace period for this loan.

Converting accounts receivable into cash will be very difficult for MSMEs as all businesses are undergoing the similar adversity. During this uncertain business time, MSMEs have liquidity shortage. In this connection, DCCI proposes to waive the interest of bank loan of impacted MSMEs for 1 year. In addition, to ensure funding and easy access to financing for MSMEs, we also propose to convert existing Re-financing Scheme into Pre-Financing Scheme with low interest rate and relaxing collateral requirements. As it is the dire time, Bangladesh Bank can provide direct liquidity support to commercial banks. The additional liquidity to be injected by Bangladesh Bank under direct liquidity support window needs to be tagged with Pre-financing Scheme to mobilize required funding to local businesses since downward business trend limits general banking business cycle. Moreover, bank guarantee requirement of limited liability companies registered under companies act can be exempted for next 6 months.

In order to support the MSMEs with adequate fund at lower cost and waive interest of impacted businesses for next six months, it needs to be ensured that there is sufficient liquidity in the banking system. We appreciate the measures of Bangladesh Bank for taking precautionary measures including reducing CRR and policy rate to ensure liquidity in banks as well as the business friendly moves of Central bank like EDF repayment time, loan repayment time extension initiated earlier. In addition to these measures, we also recommend to reduce the SLR for next six months as well as relax the ADR ratio.

In order to reduce tax burden of MSMEs allowing cash flow in hand in some extent, DCCI proposes to defer submission of income tax of FY2019-20 for impacted MSMEs and entrepreneurs. Impacted MSMEs are to be facilitated to pay the outstanding income tax splitting into three installments adjusting with tax returns applicable for subsequent three years without any penalty.

Most of the MSMEs are located on rented office space. To give them a breathing space, we recommend to defer the payment of office and manufacturing premises rent for next six months in Governments run plots like in BSCIC, EPZ. To support the smooth operations of MSMEs across the board -VAT on commercial rent, electricity, gas and water bills and license renewal fees can be withdrawn for next 6 months. In addition, Government may waive all forms of AT and VAT for both import and local stages including food and essentials items, health, hygiene, safety instruments, medical kits and export oriented manufacturing industry for next six months which will help businesses to turn-around to the some extent. And, we request for a speedy disposal of AT and Vat credit system as conventional lengthy process keep holds and stuck the cash flow of businesses.

Informal sector is the worst victim of the current onslaught of the coronavirus pandemic. Workers engaged in informal sector are most vulnerable to job loss. Considering this, job loss victim should be brought under social safety net program of the Government.

Due to the outbreak, the delivery of containers from the sea ports and land ports has slowed. Importers have to pay port demurrage for delaying clearance goods. Considering current standstill state and limited port operations, port demurrage and bank charges for MSMEs engaged in export oriented manufacturing activities, import businesses can be waived.

Since Coronavirus affects our local export business to EU and the USA and the global trading system, therefore, DCCI urges the Government to negotiate relevant counterparts to restore the GSP facility in US market and gain GSP plus facility to EU market in near future. DCCI feels that consideration of these opportune recommendations will enable MSMEs to sustain in this difficult and overcome the crisis and revive steering the economic growth in the near future.

DCCI also requests the government to create a fund for public health safety.

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