Innovative entrepreneurs between the ages of 21 and 45 will be eligible to get loans from the start-up fund formed by Bangladesh Bank.
They will get a maximum of Tk1 crore loan for an initiative or project from the fund and 10% of the fund will be allocated for women entrepreneurs.
The annual interest rate will be 4% and the term of the loan is five years. Loan installments have to be paid after every three or six months while the maximum grace period for loan repayment is one year.
If an entrepreneur shares an idea with a bank to get the loan, the bank will not disclose the idea to anyone else, whether the loan is given or not.
The rules were disclosed in the start-up fund policy published by the central bank on Monday.
The definition of 'start-up' in the policy states that start-up means the innovation and advancement of a new product, service, technology or process for the purpose of marketing.
As per the start-up fund policy, technologically innovative solutions need to be expandable, economically sustainable and commercially successful and has to create employment and increase internal resources.
The initiative/project proposed by the entrepreneur must be completely new and creative. Applicants must have a certificate of training as a new entrepreneur from the government or appropriate authority.
In the absence of formal technical education, the entrepreneur must have appropriate practical knowledge, experience and ability to manage new ventures.
The policy also states that the Tk500 crore start-up fund will be used by Bangladesh Bank as a refinancing fund.
Banks, on the other hand, will set up their own start-up funds using 1% of their operating profit. For the next five years from 2021, the banks will have to set aside this 1% of the operating profit made in December 2020.
In this way, two start-up funds are being formed. One is funded by the central bank, the other is the banks' own fund. For the current year, banks will be able to lend from both the funds.
From next year, the banks will give loans from their own funds first. Then they would give loans from the central bank's fund. In order to give loans from the fund of Bangladesh Bank, the banks have to enter into an agreement with the concerned department of the central bank.
The policy mentions that an entrepreneur must be between 21 and 45 years of age when submitting his loan proposal to the bank. He has to be engaged full time with the proposed initiative.
A loan defaulter will not get a loan from this fund. An entrepreneur will get a loan for one time only from a bank for one project. Multiple projects will not be accepted.
Banks will not disburse the loan money in one installment, the money has to be disbursed in minimum three installments after reviewing the progress of the project/initiative.
Certificate of educational qualification or technical training has to be submitted as security for the loan along with a testimony of a guarantor who is acceptable to both the bank and the entrepreneur. However, no more than two guarantors are needed.
Banks will disburse loans only after proper evaluation of the proposed project. In June and December of each year, all the information related to start-up fund loans has to be reported to the central bank.
Banks have to come up with a separate policy for their own funds and this policy has to be approved by the board of directors of the bank.
If an entrepreneur fails to repay the loan, he has to classify the loan under the existing policy. In this case, the banks have to keep provision of 5% against substandard or classified loans, 20% against dubious loans and 30% against bad or harmful loans.