The Bangladesh Bank has almost doubled the amount of funding for three refinance schemes to ensure the long-term investment flow for Covid-19-struck cottage, micro, small and medium enterprises – for their revival and sustainability.
Meanwhile, the interest rates for the schemes, for banks and customers, have been reduced by two percentage points each.
The refinance scheme for small enterprises has been increased to Tk1,500 crore from Tk850 crore.
The schemes for setting up agro-based product processing industries in rural areas – and for new entrepreneurs in cottage, micro and small enterprises – have been raised to Tk1,400 crore (from Tk700 crore) and Tk100 crore (from Tk50 crore), respectively.
On Thursday, the SME and Special Programmes Department of the central bank issued a circular, reducing the interest rate of the three refinancing schemes.
Banks will be able to avail the funds from the banking regulator at a three percent lending rate while customers will have to pay for the loans at a seven percent interest rate.
Previously, these two interest rates were five percent and nine percent, respectively.
General Manager of the Bangladesh Bank's SME and Special Programmes Department Lila Rashid said, "These three funds were formulated nine to 10 years ago. Now the sizes of the funds have almost been doubled, and the interest rates have been reduced by two percentage points."
The central bank has also relaxed certain conditions for banks to get these three refinancing schemes.
The previous conditions stated only those banks that had a maximum 10 percent default loan of their total existing loans were allowed to participate in this fund. They were also required to maintain capital adequacy, a cash reserve ratio and the liquidity reserve requirement.
In the new circular, the central bank has exempted state-owned commercial and special banks from these conditions.
The previous Bangladesh Bank circular had also said that a bank, with business experience of less than five years, would not be allowed to participate in those schemes.
Now, that criterion has been lowered to three years.
The government has already taken up different stimulus packages to revive the novel coronavirus-hit economy by providing funds to businesses.
Banks have been asked to generate Tk20,000 crore low-cost funds for cottage, micro, small and medium enterprises. Half the funds will be provided by the central bank.
The central bank has also created a Tk3,000-crore fund for small business, farmers and low-income people to provide them with collateral-free loans through non-governmental organisations and micro-finance institutions.
Moreover, the Bangladesh Bank has also introduced a stimulus fund of Tk5,000 crore to provide low-cost funding to farmers.