SME Foundation to lend Tk 400cr to small businesses

SME Foundation will provide another Tk 400 crore in loans to entrepreneurs of small and medium enterprises (SMEs), especially women, to overcome pandemic losses, accelerate economic recovery and improve the quality of life in rural communities.  

An entrepreneur will be able to get a minimum of Tk 1 lakh to a maximum of Tk 30 lakh at 4 per cent interest rate, repayable in a maximum of three years or 30 monthly installments, including a grace period of 6 months.

The foundation already provided Tk 300 crore in loans to 3,108 micro and SMEs under the government's stimulus packages centring the pandemic.

The new loans will be sourced from a "revolving fund" comprising loan repayments of the Tk 300 crore fund alongside the foundation's own funds as advised by the Finance Division, said an official.

He said a management policy has also been prepared and SME Foundation was scheduled to sign an agreement with 17 banks and financial institutions at a hotel in the capital in theevening today.

Mafizur Rahman, managing director of SME Foundation, told The Daily Star that the interest rate was the same as before and it would have been better if more funds could be gathered.

The management policy focuses value chains, women, new, physically handicapped and third gender entrepreneurs; rural areas and those inhabited by indigenous people and encouraging partner banks and financial institutions to disburse collateral-free loans.

It also delineates that 25 per cent of the total loan should be disbursed among women entrepreneurs while 30 per cent should be of Tk 10 lakh or less.

Grocery stores, pharmacies, hardware vendors and environmental polluters such as brick fields and tobacco product sellers are ineligible.

The government has till date allocated Tk 40,000 crore in two phases of equal amounts in a dedicated stimulus package for the disbursement of loans among cottage, micro, and SMEs.

Bangladesh Bank unveiled the first round worth Tk 20,000 crore in April 2020. Of the sum, 77 per cent was disbursed. Its tenure expired in June last year.

The BB allocated another Tk 20,000 crore for the last fiscal year. Only 39 per cent of it has been disbursed between July 1 and March 10, according to data from the central bank.

The government had allocated Tk 300 crore from the stimulus fund in favour of SME Foundation.

Cottage, micro and SMEs account for nearly a fourth of Bangladesh's gross domestic product.

There are about 10 lakh small-and-medium scale industries and 68 lakh cottage industries in the country, of which 7.21 per cent are being run by women.

At least 80 per cent of these firms were affected by the pandemic, according to Md Ali Zaman, president of the SME Owners Association of Bangladesh.