Pre-finance support to accelerate industrial recovery

To support closed and partially closed manufacturing enterprises, as well as other service-sector firms, Bangladesh Bank has announced a Tk 200 billion pre-finance scheme to provide working capital and help these entities operate smoothly. The fund will be revolving in nature and will have a tenure of three years. As many industries and service-sector businesses have been suffering from a shortage of working capital despite having adequate production capacity, this initiative is expected to help them survive and continue their operations.
Under the scheme, scheduled banks will provide loans at an interest rate of 4 per cent per annum, while the rate of interest (ROI) charged to borrowers will not exceed 7 per cent per annum. This indicates a relatively affordable repayment burden for borrowers. Following the COVID-19 pandemic and amid ongoing global conflicts, many emerging businesses have struggled to operate effectively due to inadequate working capital. This fund could provide much-needed breathing space for the manufacturing sector, and the current sluggish industrial growth may gradually regain momentum in line with global peers.
However, the pre-finance scheme, which has a lending cap of Tk 2 billion for a single business group, should be carefully monitored to ensure proper utilisation and timely repayment. Bangladesh Bank has already prescribed several measures to assess the actual financing needs of applicants and justify loan disbursements. Furthermore, if any irregularities are detected, the central bank will recover the amount provided under the scheme, including the applicable interest, along with an additional 2 per cent penalty.
This initiative presents an opportunity to revive industrial growth amid the current economic slowdown. The challenge now is to use this support effectively to boost revenue and productivity while ensuring that future loan portfolios remain free from the risk of non-performing loans (NPLs).

Kawsik Azad Pronoy
A banker