Bangladesh Bank (BB) will provide long-term financing in foreign currency under International Development Association (IDA) credit mainly for small and medium scale manufacturing enterprises in the country. Such loans, below and above $5 million, will be for 3 to 10 years with a three-year grace period. A bank will play a mediator (PFI-Participatory Financial Institute) to disburse and operate the loans, a BB circular said on Tuesday. The special low-cost financing in foreign currency for SME has been earmarked as a strong component of Financial Sector Support Project (FSSP). The BB said the Government of Bangladesh (GoB) has signed a Financing Agreement (FA) on June 30, 2015 with the International Development Association (IDA) regarding implementation of the FSSP. The objective of the project is to improve financial market infrastructure of the country, regulatory and oversight capacity of Bangladesh Bank and access to long term financing mainly for manufacturing firms in Bangladesh. Bangladesh Bank has also signed a Project Agreement (PA) with the IDA on the same date to carry out the tasks for implementation of the project, the BB said. The BB says the financing will be available to exporters, small and medium scale enterprises and other private sector firms (expected to be mainly manufacturing units) in the country. This will contribute to firms’ enhanced competitiveness and likelihood of grabbing emerging business opportunities. These enterprises would also contribute to job creation and economic growth. In addition, the facility and related safeguards requirements would contribute towards the improvement in compliance with health and safety standards in Bangladesh. It says this facility will be provided to meet the expenditures incurred for the eligible activities completed before 30 September 2020 by the eligible borrowers. Eligible activities for the loans, for both on-lending and re-financing, are purchase of capital machineries and equipment for up-gradation (including improvement in health and safety compliance), purchase of ocean-going vessels and specialised transport vehicles supporting transportation of goods manufactured in the country, expansion or for newly set up manufacturing industries, relocation of factories to designated industrial zones (other than EPZs/specialized zones). This financing, however, will not be provided to any sector that results in direct economic and/or social impacts through (i) land acquisition, (ii) involuntary resettlement, (iii) impact on indigenous people, (iv) loss of income sources or means of livelihood etc. The PFI must hold a valid licence from Bangladesh Bank to operate as a bank which is authorised by BB to deal in foreign exchange and has a demonstrated track record of providing long-term lending; qualified and experienced management, adequate organisation and institutional capacity for its specific risk profile; appropriate capacity, including staffing, for carrying out appraisal (including environmental assessment) of loans to borrowers and for supervising implementation and well defined credit/loan policies and procedures for management of financial risks (liquidity, credit, foreign exchange, interest rate and market risk including risks associated with balance sheet and income statement). The PFI must have a minimum rating of 3 (three) or better CAMELS Ratings determined by BB and an acceptable level of non-performing loans of no more than 8 (eight) percent, the BB said.
