Policy for Reducing the Loan Interest for Women Entrepreneurs Is Encouraging but Conditionalities Need Further Simplification

SME & Special Programmes, Department of Bangladesh Bank (BB) has issued a circular on 3 August 2021 (SMESPD Circular Letter No. 09/2021), which instructed the refinancing interest/profit rate to be fixed at 0.5% (zero point five per cent) at bank/financial institution level and maximum 5% (five per cent) at the customer level, previously which was 3% and 7% respectively as per SMESPD Circular Letter No 02/2020.

As per the instructions of paragraph 3 of SMESPD Circular No. 2/2019, net loan of CMSME sector at the end of 2024 and a minimum distribution target of 15% (fifteen per cent) of the advance status is set for women entrepreneurs(WE) for refinancing facility on priority basis under the “Small Enterprise Refinancing Scheme”.

Through its SME Development Working Committee, BUILD recommended that Bangladesh Bank take the initiative to ensure a separate refinancing scheme for WE to enable them to avail more credit facilities and a dedicated desk for WE in Banks and NBFls to get prompt services.

The circular would definitely support WE, those who are multiple loan consumers; for them, other than interest rates, timely loans and simple conditionalities are much more important. It is seen that Banks are required about 24 types of documents in the form of company documents, personal documents and business guarantor documents which becomes very difficult for submitting for small business entrepreneurs.

Simplification in this respect is also significant. Rural women entrepreneurs are precarious, suffering from the fund and cannot afford collateral; even though BB has announced several other alternatives such as educational certificates, chamber/association certificates, but Banks and FI are primarily dependent on Collateral-based loans. Nowadays, in rural areas, many returnee migrants at the local level who have just lost their jobs, suffering a severe financial crisis, need collateral-free finance even if the amount is minimal for their sustenance.

As the CMSME package has already been announced at 4% from the client, so this announcement for 5% might encourage women entrepreneurs. Still, for their benefit, loan conditionalities and time-bound loan support would be much more beneficial.

Enclosed is the press release (in English) for your kind consideration. Please feel free to contact us for any queries.