Bangladesh Bank has instructed the country's banks and financial institutions to simplify the policy of providing low-interest loans to the cottage, micro, small, and medium entrepreneurs (CMSMEs) affected by the ongoing Covid-19 pandemic.
The SME and Special Programmes Department of the central bank issued a circular in this regard on Thursday to all scheduled banks and financial institutions.
The central bank circular included some new guidelines along with the previous ones issued for the disbursement of Tk20,000 crore financial assistance package for CMSMEs declared by the government to tackle the impact of the pandemic.
To facilitate the disbursement of the incentive package, the annual CMSME loan disbursement target of the banks will be set based on the previous year's net disbursement, said the circular, adding, however, the central bank will have the authority to increase or decrease that target if necessary.
According to the circular, at least 70% of the total target allocated under this package has to be provided to the cottage, micro and small scale industries while the rest 30% to the medium scale industries.
Of the 70% given to the cottage, micro and small scale industries, 65% has to be disbursed to manufacturing and services sub-sectors and the rest 35% to trading (business) sub-sector.
On the other hand, the 30% provided to the medium scale industries, has to be disbursed to production and services sub-sectors.
At the same time, under this package, at least 8% of the total disbursed loan has to be provided to women entrepreneurs. Loans under the incentive package have to be disbursed within 30 June 2022.
Under this incentive package, both working capital and term loans will be provided to the cottage, micro and small sector entrepreneurs. Only medium sector entrepreneurs will be eligible for working capital loans. An entrepreneurial organisation will get a subsidy from the government under this package for a maximum of one year after taking the loan. Defaulting borrowers will not be eligible for this package.
Each bank will select customers based on the banker-customer relationship under their existing policy. Banks or financial institutions will determine the required loan amount after identifying the affected institutions.
The interest or profit rate of this loan will be a maximum of 9%. The borrower will pay a maximum of 4% of the interest on the loan. The remaining 5% will be subsidized by the government.