Bangladesh Bank forms Tk 20bn fund to guarantee small loans

  • Abdur Rahim Harmachi, Chief Economics Correspondent, bdnews24.com
    Published: 2020-07-25 04:15:37 BdST

Bangladesh Bank has formed a Tk 20 billion fund to help the small enterprises secure loans under a credit guarantee scheme.

The central bank cleared a policy on the scheme in a meeting chaired by Governor Fazle Kabir on Thursday after the banks ignored directives to support the small industries during the coronavirus crisis.

The scheme will continue even after the crisis is over, central bank spokesman Serajul Islam told bdnews24.com.

The banks with default loans exceeding 10 percent of their total loans will not be entitled to get the facilities under the scheme.

File Photo

File Photo

Besides the government banks, some private banks have more than 10 percent of their loans classified as bad debts.

The eligible banks will get the guarantee against new loans to cottage, micro, small, and medium enterprises or CMSMEs with 1 percent charge in the first year.

Those with less than 5 percent default loans will be charged 0.5 percent in the next years.

The charge for banks with default loans between 5 percent and 10 percent will be 0.75 percent after the first year.

The government had announced a Tk 200 billion stimulus package for the CMSME sector, but the banks have distributed less than Tk 5 billion in total as they deem small loans a risky venture.

The government will bear half the interests, or 4.5 percent of the loans from the bailout funds.

The entrepreneurs will not need security for loans under the new scheme. The scheme will guarantee loans from the stimulus package for three years. The guarantee period for loans out of the package will be five years.