SCHEME TO REVIVE RURAL ECONOMY
- Tk3,000 crore refinance scheme announced on April 20
- Target groups: farmers and micro and cottage businesses
- Interest rate 9% of which BB will get 1%, banks 3.5% and NGOs 4.5%
- Loans sanctioned till July 12: Tk314 crore, disbursed: Tk80 crore
- An individual can borrow maximum Tk75,000, while a group of 5 individuals can borrow Tk3 lakh
- An entrepreneur can borrow up to Tk10 lakh, while joint project of at least 5 members can borrow Tk30 lakh
Banks have slowly started disbursing loans to microfinance institutions from a Tk3,000 crore refinance scheme announced by the government nearly three months ago. The scheme is intended to support farmers and marginalised enterprises in rural areas hardest hit by the Covid-19 pandemic.
Only half a dozen banks have approved disbursing Tk314 crore. Of this, Tk80 crore was disbursed by two banks to three microfinance institutions (MFIs) till July 12.
Forty-two banks have entered into an agreement with the central bank to disburse the loans under the scheme announced on April 20, and set a self-target of disbursing Tk2,552 crore from the fund. Till now only a few banks have approved loans for the purpose.
Pubali Bank disbursed Tk50 crore to Shakti Foundation this week to lend the money to marginalised individuals and enterprises.
"We have a plan to arrange one more loan scheme for farmers with another large MFI," Md Abdul Halim Chowdhury, managing director of the Pubali Bank, told The Business Standard.
Another two MFIs – the Society for Social Service and Palli Mongal Kramosuchi – have drawn Tk30 crore from City Bank recently. The bank sanctioned Tk120 crore for the MFIs – Tk60 crore each – under this refinance scheme.
"The two MFIs can draw the rest of the funds any time," said Mashrur Arefin, managing director of City Bank.
The loans under the scheme will be distributed through microcredit entities in order to ensure they reach the grassroots level.
The Microcredit Regulatory Authority (MRA) has cleared 117 MFIs as they are capable of lending under this stimulus fund.
The new loan will offer a three-month grace period for microcredit non-governmental organisations (NGOs), according to the Bangladesh Bank guidelines.
An official of the central bank said the loans will not be disbursed through banks or non-bank financial institutions directly as they mostly do not have the capacity to reach villagers.
He also said the nine percent interest rate on the newly-announced loan is much lower than the rate charged by microcredit entities from their borrowers – microfinance firms usually charge up to 24 percent.
As per the Bangladesh Bank guidelines, the new loan will be disbursed first to banks at a one percent lending rate. Banks will then lend it to microcredit organisations at a 3.5 percent rate.
The NGOs will not be allowed to impose any other charges, except fees for admission, passbooks, loan forms and non-judicial purposes, from the borrowers, said the guidelines.
Low-income people, farmers and marginalised or micro businesses will get loans for income-driven purposes.
Md Serajul Islam, executive director and spokesperson of the Bangladesh Bank, said, "We are seeking the MRA's help to analyse MFIs' ability to disburse and recover the loans under this package."
"Banks have been recommended to report the progress on a regular basis, so that the central bank can properly monitor the utilisation of the funds," he added.
From NGOs, an individual can borrow a maximum of Tk75,000, while the borrowing limit for a group of five people has been set at Tk3 lakh.
NGOs' lending limit to a single small entrepreneur has been set at Tk10 lakh, while the limit will be Tk30 lakh for a joint project by a group of at least five members.
The borrowing limit will go up proportionately with the increase in the number of members in the group.
Ahsan H Mansur, executive director of the Policy Research Institute, said, "The package will be very helpful to revive the rural economy if it can be implemented properly."