BB fixes loans at Tk 25,000 to Tk 10m for CMSE

Bangladesh Bank (BB) has fixed Tk 25,000 to Tk 10 million (1 crore) under credit guarantee scheme (CGS) for cottage, micro and small enterprises (CMSE) instead of Tk 200,000 to Tk 5 million (50 lakh) segment, reports UNB.

Bringing more CMSE in the collateral free loans program under the CGS, the BB has made the latest correction of its earlier circular in this regard.

The central bank’s SME and special program department on Thursday issued a circular in facing criticism from deferent organisations’ and economists.

Following the change in CGS, more marginal self-employed people will be benefited as the loan’s minimum amount starts from Tk 25,000 only.

Banks do not have to maintain provisions for such loans as the central bank guarantees the repayment.

The central bank now hopes that banks will be interested in providing loans to CMS enterprises without collateral, since they longer have to worry about losses, nor about maintaining provisions.

But only new loans will qualify for the guarantee scheme. India has taken similar steps to counteract the pandemic fallout.

CMS enterprises will be able to avail Tk 200,000 to Tk 5 million (50 lakh) from the stimulus package, either for working capital or as term loans.

According to the central bank's Monday circular regarding the credit guarantee scheme, this latest decision was made taking into consideration the impact of the virus on CMSMEs and the demand for short-term loans in the cottage, micro and small sector.

Under the new initiative, in addition to working capital, cottage, micro and small (CMS) enterprises will also receive a credit guarantee scheme for term loans.

This will make banks interested in lending to CMS enterprises without collateral and support the timely implementation of the stimulus package.

On 13 April 2020, the government announced a Tk 200 billion (20,000 crore) stimulus package for CMSMEs. But by end-December, only around half of the package had been disbursed.

Since banks failed to disburse the loan on time, the central bank announced several extensions, finally fixing March 2021 for the stimulus disbursement.

According to the credit guarantee scheme guideline for CMS enterprises, issued on 27 July last year, although many micro and small ventures are able to repay their loans, banks are reluctant to lend to them without collateral.