TBT DESK: The Bangladesh Bank (BB) has launched a Tk 5,000 crore revolving refinance fund to support Cottage, Micro, Small, and Medium Enterprises (CMSMEs), providing much-needed working capital to boost production, sustain businesses, and generate employment.

The fund was introduced through a circular issued by the central bank’s SME and Special Programmes Department (SMESPD) on Monday. Financed through surplus liquidity held by scheduled banks, the scheme will remain in force for three years.

According to the circular, the initiative is designed to assist active CMSMEs facing working capital shortages, helping them overcome production and service disruptions while contributing to broader economic recovery and industrial growth.

Under the programme, Bangladesh Bank will provide refinance facilities to participating banks at an interest or profit rate of 4 per cent. Banks, in turn, will be allowed to charge a maximum interest or profit rate of 9 per cent to borrowers.

The revolving nature of the fund means that repayments will be recycled into fresh lending, ensuring a continuous flow of financing to eligible enterprises. Interest will be calculated on a quarterly basis in March, June, September and December.

Borrowers will also be entitled to a grace period ranging from three to six months before repayment instalments begin, providing businesses with time to stabilise operations and generate cash flow.

The central bank has instructed Shariah-based banks and Islamic banking windows of conventional banks to extend financing through approved Islamic modes while maintaining the same maximum profit rate and complying with all conditions of the scheme.

Eligible beneficiaries include operational CMSMEs experiencing financial difficulties due to working capital shortages. Refinance support will also be available against renewed working capital loans. However, borrowers classified as loan defaulters by the Credit Information Bureau (CIB) will not qualify for the facility.

Bangladesh Bank said businesses already receiving support under other refinance schemes may also be considered for financing under the new programme, subject to banks’ credit assessments and lending limits.

All scheduled banks will be eligible to participate after signing a participation agreement with the central bank. Banks maintaining an Advance-to-Deposit Ratio (ADR) or Investment-to-Deposit Ratio (IDR) above 70 per cent will receive priority access to the fund, provided they remain within regulatory limits.

The central bank noted that participating banks will bear full responsibility for loan recovery and must repay Bangladesh Bank regardless of whether funds are recovered from borrowers. While banks may obtain collateral to reduce credit risk, they will not be permitted to impose charges beyond approved banking fees.

Bangladesh Bank expects the initiative to stimulate industrial activity, support small entrepreneurs, encourage the development of import-substituting products and services, and contribute to income growth and job creation across the country. The scheme takes immediate effect under the provisions of the Bank Company Act, 1991.