Business loans provide entrepreneurs and startup founders the much-needed capital for expanding their operations. But lower cost of borrowing is what matters the most to them.
To spruce up credit demand and encourage more women to begin their own venture, Bangladesh Bank (BB) is now wooing the female entrepreneurs of the country with lower interest rates.
As the biggest step, the central bank has reduced the interest rate from 7 to 5% in line with its ambitious target of disbursing at least 15% of the loan amount earmarked for the small and medium-sized enterprises (SMEs) to women entrepreneurs by 2024.
At the same time, the central bank has reduced the interest rate from 3 to 0.5% at the institutional level as an incentive to banks and financial institutions for providing loans to women entrepreneurs.
This lowered interest rate facility has been introduced under the Bangladesh Bank's 'Small Enterprise Refinancing Scheme'.
The size of the scheme has also been increased from Tk850 crore to Tk1,500 crore, giving priority to loans for women.
Under this refinancing scheme, banks and financial institutions can provide loans of up to Tk25 lakh on the personal guarantee of women entrepreneurs as collateral.
Earlier, the central bank had set a target of giving at least 15% of all SME loans, to women entrepreneurs, by 2024. In the latest circular, it has directed that loans be disbursed to women entrepreneurs on a priority basis at new interest rates.
The issue of collateral for women entrepreneurs is considered to be one of the major problems in the expansion of cottage, micro, small and medium enterprise (CMSME) loans. To address this problem, the central bank has allowed giving loans against personal, social, and group guarantees as collateral.
According to stakeholders, one main reason why women entrepreneurs are not getting low-interest loans is that they fail to provide the necessary documents. Entrepreneurs, on the other hand, say that bankers simply do not want to give loans to women.
The central bank currently has four refinancing schemes in operation and the country's banks have about 11,000 branches across the country. There are instructions to train at least three women entrepreneurs in each branch every year and then lend to at least one of them.
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