B Mirror Report: Bangladesh Bank has launched a Tk 30 billion (Tk 3,000 crore) Export Diversification Refinance Scheme aimed at expanding the country’s export base beyond the ready-made garment (RMG) sector and strengthening production capacity in promising export-oriented industries.

The central bank’s Sustainable Finance Department issued a circular on Sunday announcing the scheme.

According to the circular, the initiative has been introduced to address product and market concentration risks arising from the country’s heavy dependence on the RMG sector while supporting the development of emerging export industries.

The refinance fund will be formed using surplus liquidity from scheduled banks and will operate as a revolving fund.

Under the scheme, Bangladesh Bank will provide refinance facilities to participating financial institutions (PFIs) at an interest rate of 4 percent, while exporters will be able to access financing at a maximum rate of 7 percent.

The financing tenure has been set at up to three years, including a grace period of up to six months. Interest will be calculated on a reducing balance basis.

The central bank said the scheme is intended to enhance export competitiveness, increase foreign exchange earnings, improve the trade balance, and create employment opportunities through the expansion of non-traditional export sectors.

Industries classified under the “Highest Priority” and “Special Development” categories in the Export Policy 2024–27 will be eligible for financing under the scheme. Exporters that use locally produced raw materials will receive priority consideration.

The circular identified the jute and leather sectors as key areas for export diversification.

However, exporters listed as loan defaulters in Credit Information Bureau (CIB) reports, companies with outstanding export proceeds yet to be repatriated, and firms with a history of loan write-offs will not be eligible for the facility.

Banks and financial institutions interested in participating must sign a participation agreement with Bangladesh Bank’s Sustainable Finance Department.

Islamic banks will also be allowed to provide financing under the scheme through Shariah-compliant investment mechanisms, provided they comply with the prescribed financing rates and tenure requirements.

To obtain refinance support, participating institutions must submit applications along with the required documents within 90 days of disbursing funds. Required documentation includes a demand promissory note, letter of continuity, debit authority letter, and an updated CIB report.

The scheme requires all financed investments to maintain a minimum debt-to-equity ratio of 70:30.

Bangladesh Bank has also introduced strict monitoring and accountability measures. Participating institutions will be required to submit quarterly reports within 15 days after the end of each quarter, while the central bank will conduct regular inspections to ensure proper utilization of funds.

The circular states that institutions providing false information or misusing funds will face a penalty interest rate of 5 percentage points above the normal refinance rate. The penalty amount will be recovered directly from the institution’s current account maintained with Bangladesh Bank.

In cases where a borrower defaults, the concerned financial institution must immediately notify the central bank. Bangladesh Bank will have the authority to recover the outstanding refinance amount in full through a one-time deduction from the institution’s current account.

The scheme has been introduced under Section 45 of the Bank Company Act, 1991, as amended in 2023, and took effect immediately.