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05 December 2023

Business Insider Bangladesh

Tk 25,000cr CMSME loan: BB extends guarantee to working capital, trade finance

BI Report || BusinessInsider

Published: 16:34, 22 November 2022   Update: 19:03, 22 November 2022
Tk 25,000cr CMSME loan: BB extends guarantee to working capital, trade finance

Bangladesh Bank headquarters is seen in Dhaka. Photo: File

Bangladesh Bank has extended the credit guarantee facility under the Tk 25,000 crore refinance scheme for the cottage, micro, small and medium enterprises (CMSMEs) to working capital and trade finance from term loans only.

The central bank said this in a circular issued on Tuesday.

Currently, term loans up to Tk 5 crore are backed by the credit guarantee scheme, which means that banks will get a certain portion of their disbursed loans from the BB if they become bad.

The BB took the decision to encourage lenders to provide collateral-free loans to CMSMEs, which need to have easy access to the banking system.

The central bank in July unveiled the refinance scheme for the CMSME. This is a revolving fund and will have a three-year tenure.

Initially, the guarantee was given to term loans only and set the credit limit for guarantee at a minimum of Tk 25,000 and a maximum of Tk 1 crore. Later in a circular in August, the BB enhanced the limit to Tk 5 crore. 

In the latest circular issued on Tuesday, the central bank widened the areas for credit guarantee to working capital and trade finance.

According to the BB credit guarantee scheme guideline, banks or financial institutions will be allowed to avail a certain percent of their total distributed loans from the scheme if the loan gets defaulted.

Under the credit guarantee scheme, the interest rate on the loans will be a maximum of 7 percent. Also, women entrepreneurs must be given 10 percent of the total fund, according to the BB circular.