BB plans Tk1,000cr fund for young entrepreneurs

The Bangladesh Bank has taken an initiative to set up a Tk1,000-crore special fund to help young people become entrepreneurs, with loans to be provided at concessional interest rates without collateral.

Under the initiative, the central bank plans to create at least 5,000 new entrepreneurs through Tk500 crore in loans and another Tk500 crore in grants. 

The initiative will also provide grants to entrepreneurs who repay their loans on time, aiming to promote a healthy credit culture.

Bangladesh Bank Governor Mostaqur Rahman discussed the initiative with leaders of the Association of Bankers, Bangladesh (ABB), an organisation of bank chief executives, at a meeting on Tuesday.

After the meeting, ABB Chairman and City Bank Managing Director Mashrur Arefin told journalists that work was underway on a special refinancing and grant package for young entrepreneurs.

He said the initiative would target young people interested in starting businesses but unable to do so because of a lack of capital.

Under the proposed refinancing scheme, an entrepreneur could receive a maximum loan of Tk10 lakh. 

The interest rate is being considered at 4%-6%, significantly lower than the prevailing 11%-15% rates on conventional bank loans and the cost of borrowing from NGOs.

Mashrur Arefin said the initiative would not be limited to providing loans but would also include grants to help entrepreneurs sustain and expand their businesses.

Banks are considering providing grants from their corporate social responsibility (CSR) funds based on borrowers’ repayment records and business performance. 

This means an entrepreneur receiving a Tk10 lakh loan could potentially receive up to another Tk10 lakh as a grant later, subject to eligibility.

No collateral will be required for the loans, according to meeting sources. 

This will allow young people who do not own land or other assets to use as collateral to access financing to start businesses.

The initiative is also expected to place special emphasis on selecting entrepreneurs at the upazila level. 

Bank branch managers or designated committees at the local level will be involved in identifying genuine entrepreneurs.

The move is aimed at reducing the scope for ineligible applicants to obtain loans through lobbying or influence.

According to the ABB chairman, banks will divide responsibilities among themselves across more than 500 upazilas to identify and verify potential entrepreneurs.

Business potential, skills and the genuineness of proposed ventures will be considered when selecting beneficiaries, he said.

The proposed fund will not be restricted to any particular type of business. 

Both production and trading ventures may be eligible, including fish farming, livestock, food production, handicrafts, shataranji (traditional floor mats) and other small and medium-sized businesses.

The initiative is expected to create opportunities for young people to enter entrepreneurship while promoting collateral-free, affordable financing and responsible borrowing practices.