Small businesses in rural areas will get subsidised loans of Tk3,000 crore under the Tk20,000 crore stimulus package announced by the government to support small and medium enterprises (SMEs) affected by Covid-19 pandemic.
The Bangladesh Bank on Monday issued a guideline for banks to disburse at least 15 percent of the announced stimulus package among SMEs in rural areas.
Women entrepreneurs will get at least 5 percent of the package which stands at Tk1,000 crore, according to the guideline.
In another guideline issued on Monday over a refinancing scheme of Tk,5000 crore for the agriculture sector, the central bank set the highest interest rate at 4 percent for the receivers.
Farmers will get a loan for a maximum of 18 months, with a 6-month grace period, under the stimulus package announced by the government on April 12.
The two new guidelines came a day after the Bangladesh Bank had issued another guideline with a set of strict conditions for industries and the service sector to get loans under a Tk30,000 crore bailout package.
Conditions set by the central bank for industries and the service sector include maintaining single borrower exposure limit, loan classification and provisioning rule, and highest loan limit for both banks and clients under the bailout package.
Earlier on April 5, Prime Minister Sheikh Hasina announced a stimulus package of Tk72,750 crore, of which 69 percent or Tk50,000 crore will come from banks.
Of the Tk50,000 crore, Tk30,000 crore has been allocated for affected industries and the service sector while Tk20,000 crore has been allocated for small and medium enterprises.
The loan of Tk30,000 crore will be given at 9 percent interest rate, of which 4.5 percent will be subsidised by the government and the rest will be paid by borrowers.
Another stimulus package of Tk20,000 crore will be given at the same interest rate, of which 5 percent will be paid by the government.
In its guideline for SMEs, the Bangladesh Bank has asked banks to give priority to the manufacturing and service sectors. Although the trading sector will be included in the package, a single entrepreneur of a trading business will not get more than Tk1 crore in loans.
Cottage and micro enterprises which were out of the banking channel can also take out loans under the package subject to having a considerable written financial statement of their businesses.
Medium enterprises that were also out of the banking channel will have to obtain at least marginal rating following the Guidelines on Internal Credit Risk Rating System to get loans under the newly announced package.
Of the total amount under the package, the share of micro and small industries will be 70 percent and the remaining 30 percent will go to medium industries.
Defaulters and the borrowers who had rescheduled their loans for more than three times are barred from getting financing under the stimulus package.
The duration of the package will be 3 years and beneficiaries will get interest subsidy from the government for a maximum of one year.
Conditions for disbursement, use, and recovery of loans
Each bank will provide highest 10 percent of their total SME loan outstanding.
As of September last year, the total SME loan stood at Tk2 lakh crore, reveal Bangladesh Bank data.
According to the guideline, the working capital loans under the stimulus package can be used only for running regular business activities. They cannot be used for adjusting existing loan accounts or for business expansion.
The loan facilities cannot be extended but banks can extend them based on a borrower's good track record. In this case, borrowers will get interest subsidy only for a year.
Banks will provide loans after ensuring that the client has been affected by the coronavirus pandemic.
Banks will lend after assessing the gravity of losses incurred by applicants and the bank-client relationship.
If the amount of loan sought under the package exceeds the loan limit of a bank, it will lend on a priority basis to the most affected industries.
Banks will be entirely responsible for recovering loans and maintaining a required provision if any loan goes into default, according to the guideline.