Bangladesh Bank plans Tk 1,000 crore collateral-free loans for young entrepreneurs

Bangladesh Bank (BB) is considering a scheme to provide young entrepreneurs with collateral-free loans of up to Tk 10 lakh at a concessional interest rate of 4 percent to 6 percent, with grants for those who repay their loans on time.

The proposed scheme could initially provide Tk 500 crore in loans to around 5,000 entrepreneurs, with each eligible borrower receiving up to Tk 10 lakh. Another Tk 500 crore could be allocated as grants, taking the total package to Tk 1,000 crore.

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However, these figures are preliminary and may change.

The proposal is still under discussion, and details such as the package size, eligibility criteria and financing structure have yet to be finalised, said Mashrur Arefin, managing director and CEO of City Bank PLC and chairman of the Association of Bankers, Bangladesh (ABB).

He disclosed the information to journalists today after a meeting with BB Governor Md Mostaqur Rahman. The meeting was held at the central bank headquarters between BB officials and an ABB delegation to discuss ways to support young people who want to start or expand businesses.

Officials from BB’s SME department and senior officials involved in SME financing are working on the draft framework. Banks would be assigned different upazilas and help identify and assess eligible applicants.

The central bank is expected to finalise the framework after further consultations with banks and other stakeholders.

Under the proposed scheme, banks would provide loans by refinancing from BB at a low interest rate. The central bank is considering setting the age limit below 28 and may allow businesses that have been operating for as little as one month or one year to qualify, rather than limiting the scheme to startups.

“We want to support a large generation of young people who have business ideas and dreams but lack the capital to pursue them,” said the ABB chairman.

The scheme would target young entrepreneurs at the upazila level, with bank branch managers helping identify potential beneficiaries. Authorities are also considering forming local committees to ensure the loans go to genuine entrepreneurs rather than people who secure them through influence or lobbying, he added.

The scheme would not be limited to any particular type of business. Trading, manufacturing, fisheries, handicrafts, food production and other small businesses could qualify under the proposal.

Mashrur Arefin said the facility aims to bridge the gap between startup financing and conventional bank loans, which are often difficult for young entrepreneurs to access.

“Even if some loans become bad, financing 5,000 young people could create a new wave of entrepreneurship across the country if a significant number of them succeed,” said the ABB chairman.

The grants may be linked to borrowers’ repayment performance and could be provided in stages instead of all at once. Banks may also use part of their corporate social responsibility (CSR) funds to finance the grants.