BB introduces credit guarantee facility to accelerate loan disbursement among marginal groups

| Update:
January 23, 2022 9:32:11 p.m.

Bangladesh Bank (BB) has introduced a new credit guarantee facility to accelerate loan disbursement to landless farmers, low-income professionals, school bank account holders and small traders.

The BB’s SME and Special Programs Department on Sunday issued a circular titled “Financial Services Credit Guarantee System” mimicking the existing unit of the Credit Guarantee Unit (CGU) to ensure repayment of loans in as part of the Financial Inclusion Department (FID) circular.

Marginal people can take a loan of Tk 25,000 to 500,000 in a single name, while Tk 2.0 million can be borrowed as a group of 5 members under the new credit guarantee scheme, reports the ‘A B.

Previously, the central bank had set up a fund of 5.0 billion taka from its own source to provide a credit guarantee scheme to speed up the disbursement of loans to the informal sector.

But the disbursement of loans in this sector is not satisfactory despite the application of the Bangladesh Bank. In order to boost the rural economy, the central bank introduced the “Financial Services Credit Guarantee Scheme” against lending to marginal people.

The BB said the adverse effects of the second wave of Covid-19 are hampering the recovery of the economy. In this context, the existing refinancing scheme for marginal/landless farmers, low-income professionals and small traders.

As part of the restructuring, no security deposit can be taken in case of lending to marginal/landless farmers, small mother professionals, school bank account holders and small traders with accounts. of 10/50/100 Tk, indicates the circular.

On the other hand, lending banks can take a personal guarantee from no more than two people, including the borrower, to provide a loan.

The lending bank will benefit from the credit guarantee scheme on the loan payable/disbursed under the scheme. In this case, the BB will provide credit guarantee support to the banks.

Lending banks must sign a participatory agreement with the Bangladesh Bank to benefit from the credit guarantee facility.