BB creating Tk 2.0b jute sector refinance fund

The central bank is going to create its own refinance fund to the tune of Tk 2.0 billion for the jute sector following refusal of the government to provide a payment guarantee against the scheme, officials have said.
A complete proposal will be presented before the board of directors of the Bangladesh Bank (BB) seeking approval of the scheme with the revolving fund having the tenure of five years, they have said.
The businesspeople in the jute sector including exporters and jute mills will get bank loans with a lower rate of interest under the scheme, BB sources say.
State-owned jute mills, private jute mills and raw jute traders will get 40 per cent, 40 per cent and 20 per cent loans respectively from the proposed fund, according to the BB.
"If any amount under the 40 per cent quota for state-owned jute mills remains unused, that will be disbursed among the private jute mills," a central banker said.
The fund for the refinance scheme would come from the BB's own coffer and the commercial banks would get loans from the refinance scheme at the interest rate of five per cent for disbursement among the businesspeople, who would get the loans at the interest rate of 9 per cent, he said.
A meeting was held in the conference room of the BB last month in this connection. BB Deputy Governor S K Sur Chowdhury presided over the meeting. It was the second such meeting held in this connection.
In the last meeting the finance division declined to provide any financing or guarantee for the proposed Tk 2.0 billion refinance fund for the Bangladesh Jute Mills Association (BJMA), according to sources.
Presently the jute mills under the BJMA were incurring heavy losses. The mills' performance was not satisfactory. Apart from that, the BJMA failed to meet the conditions in respect to earlier financing, a high official of the finance ministry said at the meeting.
Earlier, the BB had provided a fund to the tune of Tk 5.0 billion to the BJMA for boosting the sector for a period of 20 years against a government guarantee, the BB data showed.
The BJMA requested the central bank in December last for the amount of Tk 2.0 billion for them under the scheme so that they could purchase required raw materials.
The BB had been bringing many more sectors under its refinance scheme in the wake of growing demand for boosting activities in those areas in the country, sources concerned said.
The BJMA has set a target to procure 1.2 million bales of raw jute for the FY 2013-14, according to sources.
Presently, there are 238 jute manufacturing units in the country. Of these, 90 private spinning mills produce jute yarn while 18 state-owned mills under the Bangladesh Jute Mills Corporation (BJMC) and 130 private jute mills under the BJMA manufacture hessian, sacks and bags.