Factories can apply for soft loans to pay workers till May 2

The Bangladesh Bank has once again extended till May 2 the deadline for submitting applications for soft loans from a stimulus package to pay wages to workers of export-oriented factories during the Covid-19 crisis.

The central bank in a  circular on Monday said joint venture factories –between foreign and Bangladesh entrepreneurs resident in Bangladesh – at export processing zones, economic zones and the high tech park also could apply for this loan to pay wages to their workers.

As per previous instructions, only Bangladeshi factories at export processing zones, economic zones and the high tech park were eligible to avail this stimulus fund.

The central bank had earlier instructed export-oriented industries to collect certificates from respective trade associations and apply for the loan by April 20. Most factories missed the deadline, and then the central bank had extended the time till April 26. 

Mohammed Hatem, first vice-president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said most of their members could not complete opening the mobile banking accounts of their workers.

"Moreover, every factory is facing difficulties in preparing salary sheets for the last three months," he added.

After a month-long closure, 947 apparel factories have reopened recently amid the countrywide shutdown. 

The factories stopped their operation as the government on March 26 enforced a nationwide shutdown to prevent the novel coronavirus spread. 

On March 25, Prime Minister Sheikh Hasina declared Tk5,000 crore incentives for the export sector to help factories pay salaries to their workers and employees during the global Covid-19 pandemic.  

The government said it would provide the central bank with the money from its budget allocation to distribute to banks based on demand from affected industries.

The Bangladesh Bank will not charge any interest against the loans, but commercial banks can take maximum 2 percent service charge for the lending.

The incentive will go directly to employees' bank accounts, including mobile banking accounts. If any employee does not have an account, respective banks can open a new account for payments.

With this loan, factories can pay wages to their employees for three months – April, May and June.

The loan repayment period is two years, including a six-month grace period – from July to December 2020. 

Borrowers will have to pay the loan in 18 equal instalments from January 2021 to June 2022. 

As per the central bank, the loan can only be used for salary payments by factories that export at least 80 percent of their products.