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Bangladesh Bank opens new financing window for ‘no-frills’

Bangladesh Bank opens new financing window for ‘no-frills’

The central bank decides to introduce a new and unique component under an existing credit-guarantee scheme (CGS) for banks to lend to the minnows, nicknamed ‘no-frills’ account-holders, as per government policy for financial inclusion.

A proposal to this effect was approved at a board-of-directors meeting of the Bangladesh Bank Thursday, against the backdrop of a flurry of discussions about the poorer segments of people needing finances got left out for not having the ability to provide collateral.

Bangladesh Bank (BB) Governor Fazle Kabir was in the chair.

No-frills accounts can be opened with an initial deposit of Tk 10, Tk 50 and Tk 100 by the underprivileged people, schoolchildren under 18 years and working children who are allowed to maintain the accounts with zero balance and levied zero or nominal charges.

Under the new segment, banks are allowed to avail the credit-guarantee scheme against loans amounting to Tk 0.30 million or above under such accounts, according to officials.

In that case, the banks will have to pay the guarantee fee from their own sources, they added.

“We expect that the banks will feel encouraged to finance the marginal people through using the credit-guarantee scheme,” a BB senior official told the FE.

He also said the new CGS element would also help the accountholders in setting up business entities if they are interested.

Earlier on July 23 last calendar year — in the midst of the Covid-19 pandemic — the board of directors of BB approved a policy on Credit Guarantee Scheme (CGS) for the first time, aiming to expedite financing in the country’s cottage, micro and small enterprises (CMSEs).

Existing cottage, micro, and small businesses in the manufacturing, services, and trading businesses can avail the guarantee facilities if they have no collateral or insufficient collateral for their required bank finances, according to the scheme.

The initial fund size under the CGS has been fixed at Tk 20 billion.

Talking to the FE, another BB official said the new financial-inclusion segment would operate under the existing credit-guarantee scheme which is now functioning with a Tk 20-billion fund.

At the same meeting, the board also rejected two private commercial banks’ plea for waiver of penalty imposed by the BB earlier on charge of concealing CIB (Credit Information Bureau) information on loans.

In that case, the central bank had penalized Tk 0.50 million each.