BB launches Tk3,000cr refinancing scheme for small businesses

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Marginalized farmers, low-income group and affected professionals will also get the low-cost loans

Bangladesh Bank on Monday launched a Tk3,000 crore revolving refinance scheme for the low-income people, farmers and marginal or small businesses. 

The loans would be disbursed through the microcredit entities, also known as non-government organizations (NGOs), said a BB guidelines issued on the day. 

Officials at the central bank said the move of the BB was  aimed at salvaging corona-hit low income group and small businesses. Affected farmers and marginalized traders would also be eligible for the low-cost credit, they added.

“If necessary, the fund will be enhanced to prop up the rural economy,” a senior BB official told Dhaka Tribune.

“We are committed to patronize small enterprises as they employ huge population, contributing largely to the economic output.”

With a grace period of three-months, interest rate for the borrowers under the scheme has been set at 9%, while the NGOs to get at 3.5% rate from the scheduled banks.

The loans could not be disbursed through banks or non-bank financial institutions, said an official of the central bank. He also mentioned that the interest rate for borrowers was much lower than the interest rate the microcredit entities or NGOs typically charge on the rural borrowers, and micro businesses.

The microcredit firms or NGOs usually charge up to 24% for their investment as micro credit.

As per the guidelines, the central bank will disburse the fund to scheduled banks at a rate of 1% interest.

The NGOs were asked to apply discounted interest rate on the borrowers, the circular said. Except for the admission fee, passbook, loan application form and non-judicial charges, the NGOs would not be allowed to impose any other charges on the borrowers. 

The microcredit entities or NGOs have been allowed to collect loan installments on weekly or monthly basis after the three-month grace period while the NGOs will have to repay the banks on quarterly basis installment. 

Simultaneous, the banks concerned would have to repay the central bank on quarterly basis, elaborated the BB guidelines.

The responsibility of the loan recovery would rest solely  on  NGOs and banks concerned, the BB guidelines said. Low-income people, farmers and marginal or micro businesses would get loans for their income-driven purposes, it clarified.

For an individual, the borrowing limit from NGOs has been set at Tk75,000 and the limit for a group of at least 5 individuals at Tk3 lakh. 

NGOs’ lending limit to a single small entrepreneur is Tk10 lakh while the limit is Tk30 lakh for joint project of a group of at least 5 members. The borrowing capacity would increase proportionately with the increase of number of members in any group.

Under the scheme, 75% fund must go to the effected low-income group professionals hard hit by the virus pandemic, farmers or micro businesses , while the rest 25% is reserved for small entrepreneurs, says the BB.

Earlier, the BB launched a Tk5,000 crore scheme for agriculture.