Women entrepreneurs will get incentive if previous loans repaid

Women entrepreneurs will get 1% incentives if they repay their previous loans, taken under the Cottage, Micro, Small and Medium Enterprise (CMSME) sector, in time.

According to a Bangladesh Bank circular issued on Tuesday, banks and financial institutions will also get 1% incentives for disbursing loans to women entrepreneurs.

The incentive money will be given from the central bank's own fund.

The circular said the incentive is being provided to encourage women entrepreneurs, banks and financial institutions. However, no loan can be adjusted or repaid with the incentive money.

Earlier, the central bank instructed banks to reserve at least 10%, instead of 5%, of the portfolio guarantee limit under the private finance initiative (PFI) for lending to women entrepreneurs.

The central bank has also reduced the interest rate from 7% to 5% to encourage women entrepreneurs to engage in business with low-interest loans.

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 has been introduced under Bangladesh Bank's Small Enterprise Refinancing Scheme as PFI. The size of the Small Enterprise Refinancing Scheme has also been increased from Tk850 crore to Tk1,500 crore, giving priority to loans for women.

Under Bangladesh Bank's refinancing scheme, banks and financial institutions may 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 small and medium-sized enterprise (SME) loans to women entrepreneurs by 2024.  In the new circular, the Bangladesh Bank 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 CMSME loans. The central bank has allowed giving loans against personal, social, and group guarantees as collateral to address this problem.

According to stakeholders, one main reason behind women entrepreneurs' not getting low-interest loans is that they fail to provide necessary documents. On the other hand, entrepreneurs say that bankers simply do not want to give loans to women entrepreneurs.

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 at each branch location every year and then lend to at least one of them.