Bangladesh Bank (BB) has revised guidelines easing its policy and definition of cluster financing to grow specialised products in a specific area in the country.
SME & Special Programmes Department of BB issued the new guidelines in a circular on Sunday and sent it to the top executives of banks and financial institutions (FIs) for the immediate execution of credit policy in cluster financing.
The order stated that the central bank is giving priority to cottage, micro, small and medium enterprises (CMSMEs) so that the labour-intensive small sector can grow based on local raw materials in developing specific products, as per a UNB report.
At least 50 such small enterprises in 5.0 square kilometres area in the rural areas of the country will be treated as cluster financing areas. Banks and financial institutions will disburse credit to the enterprise in easy conditions and lowest collateral guarantee.
Banks and FIs have to disburse minimum 10 per cent credit in the cluster financing of their total disbursement loans of the CMSMEs sector till December 2022. It will be increased by 1.0 per cent each year till 2024.
Banks and FIs can make separate rules and regulations in line with BB policies to boost the small sector.
The SME sector has played a vital role in the economic development of some prosperous countries in Asia.
The neighbouring countries have also given due importance on SMEs. Terming SME as 'employment generate machine' they stressed SME development for higher economic growth, narrowing the gap of income inequality and poverty alleviation.
The present government has also put much emphasis on the development of SME sector considering it as 'the driving force for industrialisation, the circular stated.
As per the BB policy, Tk 50,000 to 5.0 million can be disbursed to a single enterprise of cluster financing areas-based capacity.
For more participation of women entrepreneurs in the industrial development of the country and for conducting business activities by women entrepreneurs in large numbers, priority shall have to be given to potential women entrepreneurs in respect of SME credit disbursement.
Banks and FIs will put the highest priority on receiving loan applications from small and medium women entrepreneurs and settle the loan disbursement process within a very reasonable time from the date of acceptance of the application, the cluster financing guidelines said.