Tk 2,520 crore BB fund for corona-hit CMSME sector

Bangladesh Bank (BB) has announced a new fund of Tk 2,520 crore for cottage, micro, small and medium (CMSME) enterprises which have been affected by the coronavirus pandemic.

The fund has been constituted with the financial assistance from the Asian Infrastructure Investment Bank (AIIB), a development agency, under the COVID-19 Emergency and Crisis Response Facility Project (CECRFP).

To support the refinancing scheme to the ailing CMSME sector, entrepreneurs will get loans at 4 percent interest from this fund. 

The interest/profit rate will be 4 percent for refinancing loan, which will be charged on quarterly basis (based on March, June, September and December).

Under this facility, the Participating Financial Institutions (PFIs) will be able to get additional refinance up to 50 percent of their lending under CMSME Stimulus Package, which would raise the facility up to 100 percent under the combination of AIIB facility and BB’s own refinance scheme, the Bangladesh Bank (BB) said in a notification.

The central bank formed another refinancing scheme as a part of its Tk 200-billion stimulus package plan for the CMSME sector as Covid-19 has had a major impact on business operations and financial health of CMSMEs in Bangladesh, the central bank said in the notification.

According to the policy, the term of the fund will be three years. The fund will provide loans to small and medium entrepreneurs who have been affected for more than a year. The loan will be disbursed through banks and financial institutions.

On April 26 last year, the central bank formed a Tk 100-billion revolving refinancing scheme to help implement the government-announced financial package.

CMSMEs are essential for overall economic development of a country contributing around 20-25 per cent of the GDP (gross domestic product) and are an important source of economic growth and employment, it noted.

At the time of recovery of refinanced facilities and accrued interest there on, Banks and FIs will be imposed 2 percent additional interest as penalty including interest for the delayed period for insufficient balance or fund in their current account maintained/held in Bangladesh Bank.

Banks and FIs interested to participate in this fund should apply as per the application format annexed with this circular by 15 July in 2021.

All interested banks and FIs are required to follow the Environmental and Social Risk Management (ESRM) guidelines of BB while providing CMSME stimulus loan.

In a statement last month of the central bank said Tk 14,654 crore out of Tk 20,000 crore had been disbursed to small, cottage and medium industries. The direct beneficiaries are 95,733 customers.