Small entrepreneur needs lifeline to stay in business

Dhaka, Aug 7 ( bdnews24. com)—27-year old Sanwar Hossain is the
managing director of SKS Sweater Factory, a small knitwear factory
ensconced at Hijalhati in Fulbaria of Gazipur. The former garment
worker started out with two machines in April, and is now in full
swing with 18 machines and 15 workers. Sanwar plans to expand even
more over the next five years. "I hope there will be 400 machines in
my factory with 600 workers supporting 600 families." However, his
plans will be in tatters if he does not get the money for the
expansion. Rebuffed by banks, Sarwar was forced to turn to the local
NGOs to get a loan on high interests. "Banks will not lend without
collateral so I went to the NGOs. I hope to employ eight more
machines if I get the money," he said. Despite significant role small
and medium enterprises (SME) play, most banks do not lend money to
SME entrepreneurs that much. Allegation is there that they are not
abiding by the rules of Bangladesh Bank that asks them to lend 40
percent of the distributed loans to SMEs and women entrepreneurs, a
rule that was introduced during the past caretaker government.
According to the latest data of the Export Promotion Bureau (EPB),
export earning was $ 14 billion in the 2008-09 fiscal year that
includes more than $ 6 billion from the knitwear sector. Sanwar
worked for 14 years in a garment factory, and then embarked on his
dream to become a big businessman with Tk 40 ,000 as capital, and
honesty, integrity and confidence to draw on. It has become difficult
for the small factories to stay afloat because of the chilling global
recession, said Bangladesh Knitwear Manufacturers and Exporters
Association ( BKMEA) president Fazlul Hoque. "These factories should
be helped out from the government's Tk 5 ,000 crore fund for
recession- hit sectors," he said. Factories and owners such as Sanwar
do need to be helped out. "I heard something about the global
recession but didn't think about it that much. My job is to supply
to big factories under sub-contracts," he told bdnews24. com on
Thursday. However, the workload went down with the falling orders
and reduced payment. "Earlier the factories used to pay Tk 25 for
each sweater but now they are paying not more than Tk 20 for the
same," he added. On top of this, Sanwar's factory is suffering from
seven to eight hours of power outage in a day. "I have to use a
generator that costs me Tk 50 per hour, an extra expense," he said.
Sanwar's wife, Jorina Akhter, works in his factory as an operator.
"I hope that my husband will become a big businessman in future and
I'll be able to raise my son properly," said Jorina, a supporter of
Sanwar's dreams. "Even though it's my husband's factory, I take my
salaries and incentives every month. It amounts to Tk 8 ,000-9 ,000
including overtimes," she said. "Sanwar and I used to work in the
same factory before. Now I am happy to work in his factory," said
Selim Mahmud, a worker. "I started working after a one-month training
here. Now I get Tk 4 ,000 a month," said Shimu Akhter, another
worker.

Exchange rate incentive for exporters on the cards

The government is likely to introduce exchange rate incentive under
which local exporters will get financial support in the form of
exchange rate of green buck, official sources said. 'We are
examining the central bank's proposal of giving the local exporters
the exchange rate incentive to help them facing the impact of global
recession', said an official of the finance ministry. The official
also said if the government would approve the proposal, it would be
applicable only for the local exporters, not for the importers, and
the incentives would be depending on the volume of exports. A
technical committee of the finance ministry, formed to deal with
shocks from the global economic meltdown, in its first meeting for
the current fiscal year on Wednesday, analysed the central bank
proposal to provide exchange rate incentive to the local exporters.
The technical committee of the coordination council on monetary and
exchange rate policy recommended formation of a high-powered
executive task force to tackle the global economic recession. The
central bank incentive proposal will be recommended to the task force
to tackle the global economic recession, sources said. According
to the proposal, the government can set up dual exchange rates—one for
the exporters and other for the importers. But, the change is high
to provide the incentive to the exporters in the cash form depending
on their value addition to the export items, sources said. In the
past year, Bangladesh neighbouring country Pakistan devalued it
currency by 30 per cent while India devalued its currency by 25 per
cent. The exchange rate of dollar against taka was Tk 69.30 on
Thursday. The US dollar remained almost unchanged against taka for a
long time due mainly to low demand of the greenback in the
inter-bank foreign exchange market. The banks quoted the dollar
signal rate at Tk 69.06 last week. The central has continued its
intervention in the foreign exchange market through buying US dollar
from the commercial banks directly aiming to keep the market stable.
Earlier, the leader of the Bangladesh Textile Mills Association
demanded devaluation of local currency against US dollar so they
could get an competitive edge at the global markets. But, the
garment exporters urged the government not to depreciate taka against
the US dollar as the knitwear sector mainly depends on imported raw
materials. They also said local exporters were against
depreciation of taka because devaluation would help the exporters but
in the end, it would affect the people. Former president of
Bangladesh Garment Exporters Association Anwar-ul Alam Chowdhury
Parvez told New Age that the exporters would get maximum financial
benefit if the government introduce the foreign exchange incentive.

BANGLADESH BANK approves tk 500cr fund for sharecroppers

Bangladesh Bank has approved a Taka 500 crore fund for the country's
cash-strapped sharecroppers. The central bank's board approved
the fund at a meeting on Thursday, said a BB source. The board
also decided to disburse the fund through a leading non-government
organisation, having enough experiences in small lending in the
country. 'The central bank will start the selection process of the
NGO next week. The loan would be disbursed in 150 upazilas and the
upazilas will be selected from across the country considering the
situation and needs of the sharecroppers,' the source said. The
central bank, he said, has fixed the interest rate at 10 percent so
that the marginal borrowers could afford the loan. He said the
loan would be given to the groups of sharecroppers instead of
individuals and the selected NGO would form the groups. 'The
groups would also be provided with necessary training on their
professions and managing of loans so that they could perform better
in farming and repayments of the loans as well. For the first time
in the country's banking sector's regulator offered sharecroppers the
soft loan facility,' he said. At present, most of the
sharecroppers could not borrow money from the conventional credit
system mainly due to their inability to provide collateral against
the borrowing loan. 'In many cases, the sharecroppers borrow money
from local lenders and have to pay high interests after harvesting of
crops, keeping little return for them,' the BB official said. He
observed that the soft loan would give cheaper credit option to the
sharecroppers ensuring supply of necessary fund to the farm sector.
'It would also help to increase crop production in the country,' he
added. Another source said that the central bank has been
reviewing the capacity of BRAC in managing the loan portfolio. 'It
is most likely that the country's largest NGO would get the
responsibility of disbursing the loan as it has experiences in
working with unprivileged people with an efficient country- wide
network', he added.

Growth depends on agriculture says IMF Bangladesh chief

The International Monetary Fund said on Thursday that Bangladesh's
economy will continue to grow steadily despite the continuing
uncertainty posed by the global financial crisis. 'But at the same
time the economic situation in the fiscal year to end June 2010 may
be more dependent on the pace of recovery of the US economy and
local agricultural production,' said Jonathan C Dunn, resident
representative of the IMF in Bangladesh. 'Despite all the odds and
opportunities both at home and across the world I would expect the
economy [in Bangladesh] will grow by 5 to 6 per cent in the current
fiscal year,' he told the news agency in an interview. He said
that remittances and exports, the two mainstays of Bangladesh's
economy, will continue to grow this fiscal year. 'I expect export
growth will be up at around 8 to 9 per cent this year while
remittances will be growing 15 to 20 per cent.' In the fiscal
year to end June 2009 Bangladesh earned about $25 billion from
remittances and exports, mainly ready-made garments which account
for more than 80 per cent of the country's total exports, officials
said. 'These strong earnings will be a major cushion for
Bangladesh in the balance of payments during the year,' Dunn said.
Bangladesh's foreign exchange reserves rose 33 per cent to $7.74
billion in July compared with the same month last year, officials
said. Dunn said the IMF would not wind up its office in Bangladesh
before 2012, though there had been a decision to close it in December
this year. 'At the moment we are not closing the office in Dhaka,
responding both to a request from the government and the uncertain
economic situation. The fresh decision was already conveyed to the
government,' he said.

Reserve hit new record

Bangladesh foreign exchange reserve hits a new record on Thursday when
it crossed the 8 billion US dollar-mark for the first time in the
country' s history. 'The reserve crossed US dollar 8 billion and
the growth is a good sign for the economy,' Bangladesh Bank Governor
Dr Atitur Rahman told BSS here yesterday. The country needs the
reserve for keeping its economy on a strong footing, he also said.
Earlier on July 5 this year, the reserve reached $7.42 billion when
the country received a record $10 billion in remittance. A recent
study of the World Bank, Dhaka office, projected that the remittance
inflow into the country would remain over $10 billion dollars in the
current 2009- 10 fiscal year despite the fallout of the global
financial meltdown. This projection indicates that the reserve
would also maintain a strong position, a BB official said. The
official referred to the government initiatives to help boost
remittance inflow through establishing an expatriate bank, providing
training to the potential migrant workers for skill development and
setting up of labour wings in Bangladesh missions abroad to protect
the interests of country's expatriates overseas. He said these
initiatives would help maintain steady growth of the remittance and
the reserve as well. A recent report in the Bangladesh Economic
Review, however, projected a decline in the number of Bangladeshi
workers abroad. 'More than 200,000 people migrated overseas for jobs
in the first five months of this year is lower than about 3,78,000
expatriates in the same period last year,' it said. An official of
the Bangladesh Association of International Recruiting Agencies said
though the overall number of outgoing workers declined, the outflow
of skilled manpower increased last year.