Bangladesh Bank has formed a new 20 billion taka pre-financing fund aimed at overcoming the existing economic crisis in the export-oriented frozen food and fisheries sector and boosting its competitiveness in international markets.
Central bank officials say businesses in this sector have long needed special financial support to cover high storage costs, the substantial expense of running cold chains, and a shortage of low-interest working capital. With this in mind, Bangladesh Bank has formed this three-year fund, aimed at diversifying the country’s exports, earning foreign currency, creating jobs and expanding the rural economy.
Bangladesh Bank’s Banking Regulation and Policy Department issued a circular on this Sunday, giving detailed instructions to the managing directors (MDs) and chief executives of all scheduled banks in the country.
Interest rate, who qualifies
According to the central bank’s guidance, the maximum interest rate on loans to customers under the announced fund has been set at 7 percent. In return, participating scheduled banks can obtain pre-financing facilities from Bangladesh Bank at 4 percent interest.
Producer and exporter companies engaged in processing frozen shrimp, fish and fish products, and ready-to-cook food for export, through scheduled banks, will be eligible for this loan facility. However, no borrower or institution classified as a defaulter under the Bank Company Act may receive any loan under this fund. Similarly, institutions currently receiving benefits from other government or central bank funds, such as EDF, EFPF or agriculture-based pre-financing, will not receive further financing from this fund for the same sector.
According to the policy, the pre-financing fund’s loan flow has been divided into several categories. For building an entirely new factory for frozen food processing, a term loan of up to 300 million taka is available. Meanwhile, for renovating, modernizing and expanding existing infrastructure, a term loan facility of up to 200 million taka is available. For new factory establishment, the maximum loan repayment period is seven years, including a one-year grace period. For renovation or modernization, the maximum repayment period is five years, including a one-year grace period.
In addition, for working capital needs such as purchasing raw materials, procurement from contract farmers, paying worker salaries and wages, and settling utility bills, loans of up to 200 million taka can be given, based on the institution’s turnover. While the working capital term is one year, it can be renewed for up to a maximum of two years if business transactions are satisfactory.
More loans available for solar power
According to Bangladesh Bank’s guidance, emphasis has also been placed on building environmentally friendly industries and increasing the use of renewable energy. If a factory wants to set up a solar power project, it can receive an additional loan facility of up to 50 million taka (or 30 percent of the main loan), beyond the main project loan. However, as a condition, every institution receiving funds under this scheme is required to meet at least 15 percent of its total electricity demand from solar power within two years. Instructions have also been given to ensure necessary measures to address occupational health risks for officials and staff working at the factory.