Bangladesh Bank’s Tk 62,000 crore stimulus fund, aimed at reopening closed factories, creating jobs and reviving economic activity, has made limited progress in loan disbursement four months after its announcement.
Although around Tk 10,000 crore had been disbursed from the fund by September, less than Tk 1,000 crore had reached end borrowers directly. Only Tk 50 crore had been provided to reopen closed factories, according to the report.
The central bank is now exploring ways to ease lending conditions and reduce interest rates to accelerate disbursement. It has been consulting economists, business leaders and former bankers on the issue and is also considering a 180-day action plan to revive the economy.
Bangladesh Bank initially announced a Tk 60,000 crore stimulus package in May, later increasing it to Tk 62,000 crore. The fund aims to create employment for 2.5 million people and provide loans at an interest rate of up to 7 percent.
Of the total amount, Tk 41,000 crore is expected to come from banks’ own funds, while Tk 21,000 crore will be provided through the central bank’s refinancing facilities.
The allocation from banks’ own funds includes Tk 20,000 crore for closed industrial and service-sector businesses, Tk 5,000 crore for cottage, micro, small and medium enterprises (CMSMEs), Tk 10,000 crore for agriculture and the rural economy, Tk 3,000 crore for export diversification and Tk 3,000 crore for establishing agricultural hubs in the northern region.
The refinancing portion includes Tk 7,000 crore for pre-shipment finance and packing credit, Tk 5,000 crore for cottage and small industries through the Palli Karma-Sahayak Foundation (PKSF), and allocations for several other sectors through designated financial institutions.
Funds have also been earmarked for environmentally friendly industries, startups, the creative economy, frozen shrimp and fish exports, and leather and footwear exports.
However, Bangladesh Bank data show that no loans have yet been disbursed from allocations for CMSMEs, the northern economy and agriculture.
Syed Mahbubur Rahman, former chairman of the Association of Bankers, Bangladesh (ABB) and managing director of Mutual Trust Bank, said banks must assess risks before lending. With the banking sector burdened by non-performing loans, lenders are carefully examining whether closed businesses have the capacity to resume operations.
Bangladesh Bank spokesperson Arif Hossain Khan said the stimulus fund was designed to revive economic activity and that the central bank was consulting relevant stakeholders to determine whether further measures were needed to accelerate lending.
At a recent meeting with leaders of leading business organisations, entrepreneurs proposed easing lending conditions to facilitate the reopening of closed or partially closed factories. They suggested having third parties assess the assets, production capacity, cash flow and repayment ability of such businesses before financing them.
Business leaders also called for simplifying loan application and approval procedures, speeding up disbursement, extending repayment periods for term loans and reconsidering certain conditions imposed on defaulting borrowers.
They further argued that a loan default by one company within a business group should not automatically deprive other companies in the group of banking facilities.
Shawkat Aziz Russell, president of the Bangladesh Textile Mills Association (BTMA), said reopening closed factories was essential to restoring economic momentum. Establishing new factories takes years, while restarting existing facilities can be faster and less time-consuming. He urged the authorities to relax some conditions to increase lending under the stimulus programme.
Meanwhile, former Bangladesh Bank chief economist Mustafa K Mujeri cautioned against disbursing loans merely to meet targets. He stressed that financing should go to eligible entrepreneurs through proper procedures and that stronger monitoring was necessary to ensure the appropriate use of funds and prevent further stress in the banking sector.
