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Bangladesh Bank yesterday unveiled a Tk 25,000 crore refinance scheme for cottage, micro, small and medium enterprises (CMSMEs) in order to increase their access to finances.
Borrowers in the CMSME sector will get funds in the form of term loans, whose tenure is more than one year, from the scheme, according to a central bank notice.
The tenure of the fund, which is revolving in nature, is three years.
Considered the backbone of the economy, the CMSME sector is contributing to the country by generating jobs and manufacturing items, cutting Bangladesh’s reliance on imported items. There are 78 lakh such units across the country as per the latest data from the Bangladesh Bureau of Statistics.
“If needed, the fund size will be increased,” the BB said.
Under the new scheme, banks and non-bank financial institutions (NBFIs) will receive funds at 2 per cent from the central bank, while CMSME borrowers will get loans at a maximum interest rate of 7 per cent.
Lenders will have to distribute at least 75 per cent of the loans among cottage, micro and small enterprises and a maximum of 25 per cent among medium-sized firms.
Of the total loans, at least 70 per cent must go to the manufacturing and services sectors and the rest to the trading sector.
Clients will be entitled to a maximum grace period of six months, and the repayment period, including the grace period, will not be more than five years, said the BB in the notice.
The loans can be disbursed through branches, sub-branches, agent banking outlets and mobile financial services.
The high-priority sectors eligible for the loans under the scheme include agriculture and food processing industries, farm machinery manufacturers, readymade garments, knitwear, design and decorating companies, ICT, leather and leather goods industries, light-engineering, and jute and jute goods industries.
The priority sectors are plastics and other synthetic industries, tourism, home textiles makers, renewable energy, automobile manufacturers and repairing industries, handicrafts, energy-efficient device makers, jewelers, toy industries, cosmetics and toiletries, furniture makers, and mobile, computer and television servicing industries.
Lenders with more than 10 per cent default loans will not be allowed to disburse funds under the scheme. Besides, lenders have to have at least three years of business experience.
CMSMEs, economists and bankers welcomed the refinance scheme.
Akter Hossain Khan, president of the Exportable Small Garments Owners Association in Syedpur of Nilphamari, says the scheme would help borrowers in the CMSME sector secure funds on easy terms.
“Although some banks had earlier disbursed loans among CMSMEs in Syedpur, the funds have not been enough to fulfil their needs. So, the new scheme may help widen the borrowing scope for businesses.”
Khondaker Golam Moazzem, research director of the Centre for Policy Dialogue, says inadequate access to funds has always been a barrier for the CMSME sector’s growth and expansion.
Banks and NBFIs usually feel discouraged to lend at 9 per cent since the cost of funds and the operational expenditure are high.
“From that sense, it would provide them loans on easy terms.”
The economist urged the central bank to use the experiences of the Tk 20,000 crore stimulus package, which took a long time for disbursement to accelerate, and remove complexities standing in the way of CMSMEs when it comes to access to credit.
Syed Mahbubur Rahman, managing director of Mutual Trust Bank, describes the refinance scheme as a move in the right direction since the CMSME sector is highly important given its contribution to the economy.
“In addition, the banking sector is now facing liquidity pressure, so it will help lenders secure funds from the central bank at a lower cost,” he said.
He points out that the cost of deposits in the banking sector is on the rise, creating roadblocks to disbursing funds smoothly owing to the 9 per cent lending interest ceiling.
“The new scheme will help borrowers secure funds at a lower cost.”
(TDS)
