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Bangladesh Bank has expanded access to credit for small entrepreneurs, marginal and landless farmers, low-income professionals and students, allowing loans of up to Tk 5 lakh without requiring any asset as collateral or security.
Under the new policy, banks may, however, seek personal guarantees from the borrower and up to two guarantors. An individual customer or a micro and small entrepreneur will be eligible for loans of up to Tk10 lakh, with the interest or profit rate for end borrowers capped at 7 percent.
To implement the initiative, the central bank has revised the policy for its Tk1,500 crore refinancing scheme and issued a new circular.
The Financial Inclusion Department of Bangladesh Bank issued the circular on Thursday and sent it to the managing directors and chief executive officers of all scheduled banks.
The scheme will be financed from Bangladesh Bank’s own funds and will remain in force for five years from the date of the circular.
The initiative aims to bring marginalised and disadvantaged groups into income-generating activities, improve their living standards and expand financial inclusion.
Holders of Tk10, Tk50 and Tk100 bank accounts will be eligible for loans under the scheme. New customers will have to open one of these low-cost or no-frills accounts to access the facility.
Eligible borrowers include marginal and landless farmers, people affected by disasters, low-income professionals, small traders and micro and small entrepreneurs.
The scheme covers a wide range of occupations, including fishers, carpenters, goldsmiths, blacksmiths, potters, tailors, hawkers, street vendors, rickshaw and van drivers, electronics repair workers, masons, painters and plumbers.
Small-scale food producers, weavers, tea workers, grocery shop owners, mobile clothing vendors, mobile recharge service providers and mobile financial service agents will also be eligible.
Other potential beneficiaries include information and internet service providers, street food and tea vendors, booksellers, flower, fruit and vegetable sellers, livestock and poultry farmers, fish farmers, vegetable growers, nursery owners, artisans and people involved in block printing, batik and cottage industries.
Freelancers and people engaged in promising innovative activities have also been brought under the scheme.
Women entrepreneurs will receive priority under the scheme, with at least 25 percent of the total loans required to be disbursed among women borrowers and entrepreneurs. Marginalised women and micro and small women entrepreneurs will receive particular attention.
Marginal and landless farmers holding smart cards under the Agriculture Ministry’s Farmers’ Smart Card Policy 2025 will receive priority in obtaining loans through Tk10 bank accounts.
However, banks have been instructed to ensure that farmers without smart cards are not excluded from the facility.
People affected by river erosion, tidal surges, cyclones, floods, droughts, fires, earthquakes, building collapses and pandemics such as Covid-19 will also receive priority.
Low-income residents of coastal, char and haor areas, as well as members of small ethnic communities, are also expected to benefit.
The beneficiaries of remittances sent by Bangladeshis working abroad, returning migrant workers and their family members will also receive priority. Persons with disabilities, people with special needs and third-gender individuals will be eligible for loans to engage in income-generating activities.
The scheme also provides for loans to support human resource development and employment generation among students.
Underprivileged and financially disadvantaged Student Banking account holders aged below 25 will be eligible for loans to undertake vocational, technical and information technology training. A guardian’s repayment guarantee will be required.
After turning 18, Student Banking account holders will also be able to obtain loans to pursue income-generating activities or start a profession or business based on skills acquired through training.
Loans may also be provided to cover the costs of higher education, including studies in medicine, dentistry and engineering, as well as for purchasing essential educational materials. Banks have been asked to give priority to loans backed by a guardian’s repayment guarantee.
An individual customer or a micro and small entrepreneur may receive a maximum of Tk10 lakh under the scheme, subject to an assessment of their financing needs.
For group loans, groups of two to five members may be formed. Each member can receive up to Tk8 lakh, while the maximum loan amount for a group will be Tk40 lakh. All members will be individually and jointly responsible for repayment.
Approved loans must be disbursed through the borrower’s Tk10, Tk50 or Tk100 no-frills account.
Bangladesh Bank will provide participating banks with refinancing facilities at an annual interest rate of 1 percent. Banks, however, will not be allowed to charge end borrowers more than 7 percent annually in interest or profit.
Interest or profit must be calculated on the reducing balance of the loan. Shariah-based banks may use their approved investment methods, but the profit rate charged to customers cannot exceed 7 percent a year.
Borrowers may receive a grace period of up to six months, while the maximum loan tenure, including the grace period, will be five years or 60 months.
Repayment may be made in monthly, quarterly, half-yearly or annual instalments, depending on the customer’s circumstances.
Loan defaulters will not be eligible for financing under the scheme. Customers with outstanding or unsettled loans under other government or Bangladesh Bank projects, refinancing schemes or interest subsidy programmes will also be excluded.
Banks must verify borrowers’ credit information before approving loans. However, no charge or fee can be collected from customers for obtaining Credit Information Bureau reports for loans of up to Tk3 lakh.
Banks will be allowed to disburse and recover loans through their branches, sub-branches, agent banking outlets, mobile financial services, online banking and internet banking platforms.
Participating banks will be required to regularly monitor loan disbursement, recovery and the proper use of funds. They must submit quarterly reports to Bangladesh Bank’s Financial Inclusion Department by the 15th day of the following month.
Banks interested in participating in the scheme will have to sign an agreement with Bangladesh Bank’s Financial Inclusion Department and provide separate demand promissory notes guaranteeing repayment of the principal and interest or profit.