The Bangladesh Bank has launched another Tk2,520 crore refinancing fund for the cottage, micro, small, and medium enterprises (CMSMEs) to help recover Covid-19 losses.
The fund was created with support from the Asian Infrastructure Investment Bank (AIIB). The AIIB signed a deal with the Bangladesh government on 26 February this year to provide this assistance.
The fund will be managed by the Bangladesh Bank. Its term is three years and the interest rate will be 4%. The CMSME sector will get loans from the fund as working capital.
SME Foundation Chairman Dr Md Masudur Rahman told The Business Standard this is a very good initiative.
He said small and women entrepreneurs in the marginal groups still lag behind in getting loans and securing loans for them will be a key challenge.
"Banks lag behind in implementing the CMSME incentive package. On the other hand, the demand for credit in this sector is not being met," he further said.
He added that he was ready to do anything on behalf of his organisation to implement the new fund.
The policy on the fund's management, published by the SME and Special Programs Department of the central bank on Wednesday, states that half of the Tk20,000 crore stimulus package announced for the CMSME sector last year will be used for refinancing.
If an organisation receives 50% of the required loan from that fund for refinancing, it will get the remaining 50% from the new fund.
A central bank official said banks and non-banking financial institutions that want to be involved in the implementation of the refinancing fund must meet certain criteria.
They should have three years of experience and be profitable in the last two calendar years, he said.
Besides, they should be among organisations implementing the CMSME package, should have minimum capital as per international standards, and their default loans cannot be more than 10% percent.
Moreover, they have to ensure the central bank-directed environmental and social risk management guidelines. They should give loans after scrutinising necessary documents.
They will face a 2% penalty if there is a delay in disbursing loans due to insufficient balance. On the other hand, if a client uses loans for a different purpose, he will also face a 2% penalty.