Small enterprises happy over monetary policy as they get cash lifelineThe central bank said that as of mid-June, banks have mobilised loans worth Rs 55.54 billion to 29,157 SMEs.
Small and micro enterprises have expressed happiness over the latest monetary policy which finally addresses the sectors hit hard by Covid-19 but urged the government for prompt implementation of schemes.
Tens of thousands of micro, small and medium enterprises (SMEs) which provide jobs to millions of people have not been able to re-open due to a lack of funds although the government has eased the lockdown.
Umesh Prasad Singh, acting president of Federation of Nepalese Cottage and Small Scale Industries, said that due to the problem of liquidity, raw materials, labour, repayment period of bank loans and rental fee, only 15 to 20 percent of SMEs are able to resume operation.
“Unless the SMEs get loans from the refinancing provision announced by the monetary policy, it will be difficult to reopen,” he said. "So, there is an urgent need to implement the provision."
As per the policy, export and troubled industries as well as other sectors will get special refinancing facilities at a maximum 3 percent interest rate, while micro, cottage and small industries will get credit at a maximum 5 percent interest rate.
As part of providing relief, the policy has extended the deadline for paying loan instalments by six months, nine months and one year, depending on the degree of impact on the particular sector as the central bank seeks to ease the pains caused by the pandemic on businesses.
The banks and financial institutions can lend Rs1.5 million per customer involved in micro, cottage and small enterprise while they can lend up to Rs50 million under special loans.
The central bank and financial institutions have been lent the refinancing fund at 2 percent interest rate which they can lend at 5 percent interest rate to micro, cottage and small enterprises.
Most of the suggestions provided by the sector have been addressed in the policy, Singh added.
“This is probably the first time that the government has addressed the cottage and small scale industry,” he said. The government has realised the importance of the cottage and small scale industry during the lockdown period as most of the daily essential consumable items were being produced by the sector, he said.
According to Nepal Rastra Bank, increasing credit flow to business operations including agriculture, cottage and small scale industry through concessional loan schemes will increase production and employment.
The central bank said that as of mid-June, banks have mobilised loans worth Rs55.54 billion to 29,157 SMEs.
According to the federation, there are 418,000 registered cottage and small scale industries operating in the country. The federation said that there are around 400,000-500,000 unregistered SMEs across the country. The sector provides employment to 2.6 million people directly.
Similarly, there are 36 different types of industry under the cottage and small scale industry producing Dhaka textile, cotton fabric, aloo, bricks, spices, dairy, tea, rice and lentils, flour, among others.
Similarly, as per the policy, development banks and financial institutions should mobilise 20 percent and 15 percent of the funds from their total credit portfolio to micro, cottage and small scale industry, respectively, for the next five years.