The Karmasangsthan Bank, in the face of acute fund shortage, is set to take Tk 2.0 billion loan from the Sonali Bank to expand its business, officials said.
The Sonali Bank has agreed to give the loan at 6.25 per cent rate of interest to the Karmasangsthan Bank. The ministry of finance approved the procedure in this regard on Tuesday.
"There is a significant demand for our loans since we offer simple terms and conditions. If we can get some more funds, we will be able to enhance our business," the bank's managing director Abdur Rauf told the FE.
The bank was established in 1998 with a view to involving unemployed youths in economic activities through self-employment opportunities.
The bank mainly provides loan for establishing small businesses including handloom, poultry, tailoring cottage industries, block and boutique, wood and steel furniture, pottery, grocery, pharmacy, fishery and livestock.
Mr Rouf said the source of fund of the bank is paid-up capital from which it lends to customers. Presently, the bank's authorised capital is Tk 7.20 billion and paid-up capital is Tk 5.20 billion. But until now, it received Tk 4.745 billion as paid-up capital from the government.
The bank pays as high as Tk 1.5 million to an individual or organisation as loan. For up to Tk 0.5 million, borrowers need no collateral. The bank charges 11 per cent interest on loans for productive sector and 13 per cent on loans for trading.
He said presently the bank has some 101,000 borrowers. There are some 150,000 small savings accounts through which the bank receives some deposits.
"Since we provide up to Tk 0.5 million collateral-free loan, there is a huge demand for the same," Mr Rouf said.
The managing director said the rate of recovery of loans of the Karmasangsthan Bank is 95 per cent while the rate of classified loans now stands at 6.0 per cent or around Tk 500 million.
"We have requested the government to raise the authorised capital to Tk 15 billion and provide necessary funds so that we can lend unemployed youths adequate money for doing business," he said.
The bank's prime target is to help poverty alleviation through employment generation for which a large amount of money is needed, Mr Rouf noted.
Until fiscal year 2015-16, the bank's accumulated loan disbursement reached Tk 31.40 billion which helped employment generation for 1.49 million people.
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