BB plans Tk1,000cr fund to create 5,000 entrepreneurs

Highlights:

• Fund will comprise Tk500cr in loans, Tk500cr in grants
• Collateral-free loans up to Tk10 lakh at a 4-6% interest rate
• Grants up to Tk10 lakh based on repayment performance
• Banks will select candidates from over 500 upazilas

Bangladesh Bank has taken an initiative to establish a Tk1,000 crore special fund, offering collateral-free loans and grants, aimed at developing the country's youth and creating at least 5,000 young entrepreneurs.

Under this fund, young entrepreneurs will receive loans at low interest rates, alongside grants based on their loan repayment performance. The initial target is to create at least 5,000 entrepreneurs, with Tk500 crore allocated for loans and Tk500 crore for grants.

Bangladesh Bank Governor Md Mostaqur Rahman held a meeting with the Association of Bankers, Bangladesh (ABB) this afternoon (11 August) to discuss the implementation of this new initiative.

Following the meeting, ABB Chairman and City Bank Managing Director Mashrur Arefin told journalists that work is underway on a special refinancing and grant package for young entrepreneurs.

"There is a plan to bring in youths who are interested in starting a business but cannot do so due to a lack of necessary capital," he said.

How the fund will work

Mashrur said that under the central bank's refinancing scheme, an entrepreneur can get a maximum loan of Tk10 lakh. The interest rate for this loan is expected to be kept between 4% and 6%.

Consequently, the cost of funds for the entrepreneurs will be significantly lower compared to conventional bank loans, which typically charge 11-15% interest, or NGO microcredit.

He further noted that the initiative goes beyond just providing loans. "It also includes a grant facility to help sustain businesses. Considering the timely repayment of loan instalments and business performance, banks plan to provide an equivalent amount as a grant from their corporate social responsibility (CSR) funds."

This means if an entrepreneur receives a Tk10 lakh loan and repays it properly, they may be eligible for a grant of up to Tk10 lakh based on their qualifications, Mashrur added.

According to officials, these loans will be collateral-free, creating an opportunity for eligible youths to start businesses even if they do not have assets or land to mortgage.

Focus on rural entrepreneurs

According to meeting sources, there is a plan to give special emphasis to the upazila level when selecting entrepreneurs. Genuine candidates will be selected through bank branch managers or designated committees at the local level.

This aims to reduce the chances of unqualified individuals obtaining loans through lobbying or undue influence.

The ABB chairman said banks will divide the responsibilities among themselves in more than 500 upazilas across the country to identify and verify potential entrepreneurs. Business potential, skills, and the initiative's authenticity will be prioritised during the selection process.

Under this fund, he said, not just a specific type of business, but both manufacturing and trading initiatives can be included. These may range from fish farming, livestock, food production, and handicrafts to Shatranji making and other small and medium enterprises (SMEs).