The much-hyped 'Entrepreneurship Support Fund' (ESF) will be launched today (Sunday) replacing the existing Equity and Entrepreneurship Fund (EEF), a finance ministry source said.
The Ministry of Finance (MoF) has already approved the new loan support model, he mentioned.
The move for setting up a new ESF has been taken, considering it necessary to recover disbursed funds properly and make a time-befitting policy, according to a Bangladesh Bank (BB) source.
As per the new policy model, a minimum of Tk 0.8 million and a maximum of Tk 50 million in loan support will be provided for agro-based industries.
A maximum of Tk 120 million will be given to machinery-dependent agro-based projects, according to the policy.
IT-based projects will be entitled to get a minimum of Tk 0.5 million and a maximum of Tk 50 million in loan assistance.
The ESF will support up to 49 per cent of a project's cost while entrepreneurs will invest the remaining 51 per cent. The loan tenure should be eight years and the interest rate 2.0 per cent.
Under the EEF, a major weakness in the project operation was lack of proper selection of entrepreneurs, a high official of the BB said.
Many entrepreneurs have defaulted on loan repayment and failed to buy back government shares as per the terms and conditions, he added.
According to an investment agreement of EEF, entrepreneurs needed to complete their buyback within eight years. In case of failure, the entrepreneurs concerned should face action. But the process was complex and legally ineffective.
No funds could be recovered so far by filing cases.
Currently, a good number of entrepreneurs have stopped making repayments, taking advantage of legal and policy limitations, a senior official of the central bank said.
The move for launching the new model has been taken to bring such entrepreneurs under a legal framework and make the recovery of support funds easier, an official of the Financial Institutions Division said.
The central bank was the implementing agency of the EEF project until May 2009. Later, the operational function of the fund was transferred to the Investment Corporation of Bangladesh.
The government created the EEF in fiscal year 2000-2001 to extend support to the two promising sectors -- agro-based food processing and software -- for which Tk 1.0 billion was allocated.
According to officials, the government allocated over Tk 20 billion in favour of the fund since its inception.
Of the total amount, Tk 15.13 billion went to the agriculture sector while Tk 5.12 billion to the information and communication technology (ICT) sector as of March last year.
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