IBFB suggests adequate measures to safeguard economy

The International Business Forum of Bangladesh (IBFB) and its President Hafizur Rahman urged Bangladesh Bank to take adequate financial measures to safeguard economy and business of the country during the ongoing volatile political situation.

In a recent proposal sent to the Governor of Bangladesh Bank, IBFB strongly suggested some special financial measures such as extending the deadline for CIB Reporting, rescheduling bank loans, reducing lending rate up to 10 per cent or below, bringing down the interest rate spread below 4.0 per cent etc. IBFB, as mentioned in the proposal, strongly believes that in a growing democratic country like Bangladesh peaceful and business friendly environment is a sine qua non for ensuring the development wheel rolling on through which trades and businesses of the country will remain uninterrupted.

bbBut, all of us, with deepest concerns, are observing recent political turmoil and deterioration of overall law and order situation around the country, which is adversely affecting the business and economic activities, especially the production and supply chain system causing serious interruption in supply of raw materials, production process and deliveries of products of the industries including RMG and other manufacturing sectors. The proposal mentioned that as we know, all businesses have to bear the high rate interest on the loan regardless of the political turmoil (a force majeure cause) from both banking and non-banking financial institutions.

Therefore the projected earnings of all companies are being hampered severely which is affecting the cash flow negatively. As such it is getting very difficult for the entrepreneurs to fulfill business fund requirements to operate running expenses. Therefore, full exemption of the interest on loans has become essential until the political turmoil is fully settled down. It is to be noted that the entrepreneurs are dependent to Banks & Institutional loans to operate their businesses and meet the temporary fund crisis. But due to the existing political disturbance the entrepreneurs are facing difficulties to repay installments on scheduled time. Since it is Bangladesh Bank’s policy on CIB reporting that failure to pay installments for two consecutive months would force a financial institute to report to the central bank, IBFB earnestly requests Bangladesh Bank to extend the CIB reporting period to 3-6 (months).

Additionally IBFB also requests the central bank to take adequate measures to inspire the scheduled banks in supporting the entrepreneurs overcome this crisis period through soft/low interest rate loans. Although the Interest Rate Spread has reportedly come down to 4.95 per cent in October from 5.01 per cent in September 2013, IBFB strongly suggests that the Interest Rate Spread, keeping recent unfriendly conditions for business and economy in mind, should be kept below 4.0 per cent. As such, the Forum urges Bangladesh Bank to pursue the schedules banks to reduce the lending rate. All these attempts would allow the business community to have some times to restructure their finances, receivables and production process, and thus ensure the businesses gradually return from becoming financially black listed as SMA (Special Mention Account) then SS (Sub-standard Loan), DL (Doubtful Loan) & finally CL (Classified Loan).

In the context above, IBFB has drawn kind attention of Bangladesh Bank as well as the Government to consider some recommendations depicted below: Extend the deadline of CIB Reporting until 2nd Quarter of 2014 in order to help the entrepreneurs to sustain and continue their regular business operations Rescheduling of bank loans Exempt interests on loan until the political situation is settled down Bring down the interest rate spread below 4.0 per cent through decreasing interest rate on lending, most suitably at 10 per cent or below.