Bangladesh Bank yesterday rolled out a guideline for the credit guarantee scheme (CGS) to give the much-needed boost to the cottage, small and micro enterprises (CSME) that are struggling to stay afloat amid the Covid-19 fallout.

Lenders will be allowed to avail 30 per cent of their total distributed loans from the CGS if the amount disbursed becomes defaulted, according to the central bank guideline.

The CGS will be applicable for loans given to firms in the CSME sector and both banks and non-banking financial institutions will be allowed to enjoy the CGS fund. 

The board of Bangladesh Bank approved the scheme, worth Tk 2,000 crore, for entrepreneurs in the CSME sector to help them tackle the ongoing crisis brought on by the coronavirus pandemic.

The central bank formed the CGS by way of taking the government fund in the wake of continuous reluctance from lenders to give out loans under the stimulus package.

The scheme will give coverage to the fund, which is being disbursed from the Tk 20,000 stimulus package for the cottage, micro, small and medium enterprise (CMSME) sector.

Lenders will get 80 per cent of their disbursed fund to a single enterprise if the amount turns classified.

However, a lender will not be allowed to get back more than 30 per cent of its disbursed fund from the CGS.

The guarantee scheme will cover potential CMSEs with viable business expansion plans that are suffering from a lack of collateral.

Women-owned CMSEs will get priority for availing this facility.

Existing CMSEs in the manufacturing, services and trading sectors can avail guarantee facilities if they have no collateral or insufficient collateral for their required bank finance.

Clients will have to pay 1 per cent commission on their loans to banks when they avail the fund while lenders will have to deposit the commission to the central bank.

Under the central bank stimulus package for the CMSME sector, borrowers will get loans in the form of working capital with a maximum repayment tenure of one year.

The desired lenders will have to ink a participation agreement with the central bank to enjoy the CGS fund, a central bank official said.

A fresh notice will be issued in this regard within a day or two, he added.

On April 13, Bangladesh Bank announced the stimulus package in order to help the CMSME sector tackle the economic slowdown brought on by the ongoing coronavirus pandemic.

Lenders have so far disbursed nearly 29 per cent of the package to beleaguered borrowers in the CMSME sector.