BB cuts credit risk for banks to increase stimulus fund disbursement
Microfinance institutions will take loans from three banks to make certain that the government's Tk 3,000 crore stimulus package smoothly reaches marginal businesses farmers and low-income professionals.
The Bangladesh Bank, however, has not increased the loan ceiling for microfinance institutions (MFIs) from the stimulus package, according to a notice issued by the banking regulator yesterday.
The initiative can help banks decrease the risks in the implementation of the packages, said a central bank official.
On April 20, the central bank unveiled the fund in the kind of a refinance scheme for low-income professionals, marginal farmers and micro-enterprises to keep them afloat.
According to the rule, the central bank had said a bank could lend up to Tk 150 crore or 30 % of its last three years' average loan to an MFI, or whichever was lower.
If a bank channels the complete fund to an individual MFI, the lender's loan may enter into a risky zone, said the central bank official.
Three banks, rather than one as per previous rules, will now be permitted to hand out the loans to an MFI, and therefore the three will share the credit risk.
Under the package, the BB will in the beginning provide the fund to banks at 1 % interest, that they will lend to the MFIs at 3.5 % interest.
The MFIs will be permitted to charge borrowers a maximum of 9 % as interest.
Smaller businesses like roadside tea stalls will get this loan, the highest amount of which will be Tk 75,000, considering that each shop is owned by an individual.
If a tiny business is owned by a lot more than five persons, the loan ceiling would rise to Tk 3 lakh.
The loan should be repaid within a year.
MFIs are allowed to disburse loans which range from Tk 10 lakh to Tk 30 lakh to microenterprises and their repayment duration would be two years.
The duration of the revolving scheme is 3 years and the quantity of the fund will be widened if required, said the BB notice in April.
However the stimulus package has yet to get the expected momentum as some banks have not taken the initiatives required to hand out loans to underprivileged groups.
Just as much as 42 lenders, that have signed participation agreements with the central bank to implement the package, have up to now disbursed 23.41 per cent of the Tk 3,000 crore loan.
The central bank earlier set a roadmap to disburse the fund within December this season.
Yesterday, it issued show-cause notices on two banks for failing woefully to disburse anything from the package, said the central bank official.
