MFIs to get more money to lend under stimulus package

Microfinance institutions (MFIs) will receive more funds from banks under the government's Tk 3,000-crore stimulus package for distribution among the pandemic-hit clients after the central bank raised the ceiling on the loans they can secure from commercial lenders.

On April 20, Bangladesh Bank unveiled the refinance scheme for low-income professionals, marginal farmers and micro-enterprises to keep them afloat.

Marginal businesses and farmers with no access to banks and non-bank financial institutions will be allowed to get loans from the revolving fund.

At the time, the central bank had said a bank could lend up to 30 per cent of last three years' average loan to an MFI or 2 per cent of the Tk 3,000 crore stimulus package, or whichever was lower.

But yesterday the central bank raised the ceiling from 2 per cent to 5 per cent, according to a circular. 

Under the package, the BB will initially provide the fund to banks at 1 per cent interest, which they will lend to MFIs at 3.5 per cent interest. The MFIs will be allowed to charge a maximum of 9 per cent interest to borrowers.

Small businesses like roadside tea stalls can get loans, the highest amount of which would be Tk 75,000. If the small businesses are owned by more than five persons, the loan ceiling would go up to Tk 3 lakh.

The loans must be paid back within a year.

But MFIs will be allowed to disburse loans ranging from Tk 10 lakh to Tk 30 lakh to micro-enterprises and their repayment duration would be two years.

The duration of the revolving scheme is three years and the volume of the fund will be widened if required, said the BB notice in April.