Bangladesh Bank (BB) today launched a Tk 5,000 crore revolving refinance fund for the Cottage, Micro, Small and Medium Enterprise (CMSME) sector to ease working capital shortages, boost production and support employment generation.
The central bank introduced the fund through an SMESPD circular issued by its SME and Special Programmes Department, utilizing surplus liquidity of scheduled banks. The scheme will remain effective for three years from the date of issuance.
According to the circular, the fund aims to strengthen production activities, revive economic momentum and create direct and indirect employment opportunities by providing working capital support to active CMSMEs facing financial constraints.
Under the scheme, Bangladesh Bank will provide refinance to participating banks at an interest or profit rate of 4 percent, while banks may charge a maximum interest or profit rate of 9 percent to end borrowers.
The revolving nature of the fund will ensure continued liquidity as repayments are recycled into new financing. Interest will be calculated quarterly in March, June, September and December.
Borrowers will be eligible for a grace period of three to six months before repayment of installments begins.
The circular directs Shariah-based banks and Islamic banking windows of conventional banks to provide financing under approved Shariah-compliant models while maintaining the maximum profit rate of 9 percent and complying with all conditions of the scheme.
Active CMSMEs experiencing production or service disruptions due to working capital shortages will be eligible for financing under the fund. Refinance facilities will also be available against renewed working capital loans.
However, borrowers classified as defaulters by the Credit Information Bureau (CIB) will not qualify for the facility.
Bangladesh Bank said clients already benefiting from other refinance schemes may also be considered for financing under the new fund, subject to banks' assessment and credit limits.
All scheduled banks will be eligible to participate after signing a Participation Agreement with Bangladesh Bank's SME and Special Programmes Department.
Banks maintaining an advance-to-deposit ratio (ADR) or investment-to-deposit ratio (IDR) above 70 percent will receive priority in accessing the fund, although they must remain within overall regulatory limits.
The central bank said participating banks would bear full responsibility for loan recovery and would be required to repay Bangladesh Bank regardless of whether funds are recovered from borrowers.
To mitigate credit risk, banks may obtain collateral from clients but will not be allowed to charge any fees beyond the approved Schedule of Charges.
Bangladesh Bank expects the fund to contribute to income growth, employment generation and the development of import-substituting products and services, while supporting small entrepreneurs and stimulating industrial activity.
Issued under Section 45 of the Bank Company Act, 1991, the circular takes immediate effect. Bangladesh Bank also reserved the authority to inspect loan utilization and seek relevant documents from participating banks to ensure compliance with the scheme's provisions.
