Banks discuss Tk1,000cr package for young entrepreneurs at 4-6% interest

Commercial banks are discussing a Tk1,000 crore financing package with the Bangladesh Bank to provide young entrepreneurs with loans at 4-6% interest, with collateral-free financing of up to Tk10 lakh under the preliminary plan.

Association of Bankers, Bangladesh (ABB) Chairman and City Bank Managing Director Mashrur Arefin disclosed the proposal after a meeting with the Bangladesh Bank governor today (11 August). Top representatives of around a dozen banks and relevant central bank officials were present in the meeting.

Arefin said the package, which is still at the draft stage, aims to help young people who want to start or expand businesses but lack sufficient capital.

Commercial banks could provide the loans using Bangladesh Bank's refinancing facility. The loan amount, interest rate, eligibility criteria and other details have yet to be finalised. Discussions are also underway on whether the scheme will cover only new entrepreneurs or those who have been operating businesses for at least a year.

"We do not want to make a rigid distinction between trading and manufacturing," Arefin said, adding that the programme could cover genuine entrepreneurs involved in manufacturing, trading, fisheries, home-based food production and handicrafts.

Successful entrepreneurs may qualify for grants

The programme could also provide grants alongside loans. Under the preliminary proposal, entrepreneurs who receive up to Tk10 lakh in collateral-free financing and demonstrate good business performance and repayment capacity could later receive grants of up to another Tk10 lakh.

The grants could be disbursed in phases based on business performance, with part of banks' corporate social responsibility (CSR) funds potentially used for the purpose.

Arefin said the proposed scheme would fall between conventional startup funding and traditional bank financing, targeting young people whose businesses are held back by a lack of capital.

The package size has not been finalised, but a Tk1,000 crore package could finance around 10,000 entrepreneurs with Tk10 lakh each.

Arefin said conventional bank loans can carry interest rates of 13% or more, while NGO financing can be even more expensive, making 4-6% loans a significant opportunity for young entrepreneurs.

Banks to identify entrepreneurs locally

The programme is expected to reach entrepreneurs down to the upazila level, with local bank branch managers playing a key role in identifying potential borrowers.

Upazila-level committees could scrutinise applications, while banks could be assigned specific upazilas to identify entrepreneurs, process applications and disburse loans.

Arefin said selecting genuine entrepreneurs would be crucial to preventing the misuse of funds through lobbying or other influence.

"Some loans may turn bad, and some businesses may fail. But if 5,000 young people receive financing and even 100 become successful entrepreneurs, it could create a major wave of new entrepreneurship across the country," he said.

Arefin said Bangladesh Bank SME Department is working on the proposal, adding that discussions are focused on ensuring funds reach the right sectors and genuine entrepreneurs.