PKSF to borrow Tk5,000cr from cenbank to expand finance for small entrepreneurs
The funds will be released once the finance ministry provides a sovereign guarantee, which PKSF has formally requested. On 27 June, PKSF Managing Director Md Fazlul Kader wrote to the secretary of the Financial Institutions Division, seeking a government guarantee for the loan.
The Palli Karma-Sahayak Foundation (PKSF) is set to borrow Tk5,000 crore in low-interest financing from Bangladesh Bank to expand lending to small and micro entrepreneurs, with the central bank already approving the loan.
The funds will be released once the finance ministry provides a sovereign guarantee, which PKSF has formally requested. On 27 June, PKSF Managing Director Md Fazlul Kader wrote to the secretary of the Financial Institutions Division, seeking a government guarantee for the loan.
According to the letter, the 2026-27 national budget includes a special incentive package for the small entrepreneur sector. As part of that initiative, the central bank approved the Tk5,000 crore loan at a concessional interest rate.
The money will be distributed among small and micro entrepreneurs to help create jobs and expand entrepreneurial activities. PKSF plans to establish a "Special Fund for Creating Cottage and Micro-sector Entrepreneurs" with the financing.
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Under Bangladesh Bank's conditions, the finance ministry must provide a sovereign guarantee covering both the loan principal and the applicable interest. PKSF has therefore requested the ministry to issue the required guarantee.
A finance official, speaking on condition of anonymity, said the government had consistently provided sovereign guarantees for PKSF's loans and was expected to do so again.
However, the official said PKSF would have to comply with the sovereign guarantee policy introduced on 2 June.
Under a notification issued by the ministry on that date, the government will charge a 0.25% guarantee fee when providing guarantees against loans taken by state-owned, autonomous and government-owned institutions or organisations. The fee must be paid in a single instalment into the state treasury.
'Sopan' programme
Speaking to TBS, PKSF Managing Director Md Fazlul Kader said the Bangladesh Bank funds would be channelled to small and micro entrepreneurs through a programme called "Sopan".
He said the programme aims to promote prosperity and strengthen the resilience of small entrepreneurs.
"Microfinance has two objectives. One is poverty reduction and the other is achieving prosperity. The objective of the Sopan programme is prosperity. In other words, it will help small entrepreneurs grow into larger businesses," he said.
Fazlul added that the programme would increase the production of goods and services and expand supplies to both domestic and international markets.
He said the fund would grow further in the future, with PKSF planning to expand its operations through Bangladesh Bank financing rather than borrowing from foreign sources.
"The size of this fund will eventually increase to Tk10,000 crore and even Tk20,000 crore," he added.
Track record, lending terms
In its letter, PKSF said that since its establishment in 1990, it has worked as a government development partner, implementing microfinance and financial inclusion programmes.
The organisation noted that it had previously received sovereign guarantees for both foreign and domestic loans and had repaid all of them on time. It also claimed there had been no instance of default or failure to meet obligations under any government-backed guarantee.
Officials said the loan would be used exclusively to support the creation of small and micro enterprises.
Bangladesh Bank will charge 3% interest on the five-year loan. PKSF will lend the funds to its partner organisations – NGOs that distribute loans at the grassroots level – at 7% interest. Those organisations will be allowed to charge borrowers a maximum interest rate of 18%.
Fazlul said employment generation was essential for inclusive development and that the new fund had been created to generate jobs at the grassroots level.
"The money from this fund will be invested in sectors that create employment," he said.
He also cited a joint study by the World Bank and Bangladesh Bank, saying that small and micro entrepreneurs in Bangladesh currently face a financing gap equivalent to $73 billion, indicating significant investment potential in the sector.
PKSF's own analysis found that every direct job created in the small and micro enterprise sector generates, on average, at least 3.5 additional indirect jobs through linked economic activities, he added.
