Bangladesh Bank Governor Dr Atiur Rahman, and Chief Representative of JICA Bangladesh Office Dr. Takao Toda seen at an agreement signing ceremony at the BB office in Dhaka Monday.

Bangladesh Bank (BB) on Monday opened a Tk 5 billion fund to provide financing facilities to the country's small and medium enterprises (SMEs).

Under the two-step fund, provided by Japan International Cooperation Agency (JICA), 41 banks and financial institutions (FIs) will be provided with re-finance or pre-finance for lending to SMEs.

The fund will be disbursed to the participatory Banks and FIs at a maximum interest rate of 5 percent for medium (2-year) and long term (8-year) period. The Banks and FIs may charge the market rate in case of lending.

BB has signed separate agreements with 22 participatory banks and 19 FIs to this effect.

BB Governor Dr Atiur Rahman and Chief Representative of JICA Bangladesh Office Dr. Takao Toda were present while the deals were signed during a function at BB headquarters on Monday.

While speaking at the function, Dr Atiur said the central bank has identified that there is a huge gap in the country’s financial market for the SMEs to get for mid-term and long-term funding for investment in technology and other productive areas.

Bangladesh Bank signed an agreement with JICA in 2010 for a fund worth 5000 million Japanese Yen as Overseas Development Assistance (ODA). Of the total fund, JICA has released 1000 million Yen (Tk 1 billion) in March this year, the BB governor informed the function.

He said the fund aims to develop a medium to long-term credit market to support the SMEs to meet their investment requirements.

JICA chief represen-tative in Bangladesh Takao Toda observed that Bangladesh would be able to create more job opportunities by financing the SME sector, which also has a huge potential to grow further like those in other Asian countries.

The Daily Sun/Bangladesh/ 12th June 2012

Prime Minister Sheikh Hasina will sit with Power Division officials today to know about the work progress of a series of under-construction power projects, implementation of which are at stake in the tenure of the present government due to fund constraints.

“PM will sit with us to discuss the power sector scenario and its financing,” Power Division Secretary M Abul Kalam Azad told daily sun yesterday.

The Power Division is worried over the implementation of 24 public and private sector power projects, with a stipulated production capacity of around 3,197 megawatt of power, by 2014 due to fund shortage.

A total of 13 out of 15 power projects being constructed under the private sector are yet to arrange funds to implement the projects. Besides, a public sector project has also failed to manage financing, Power Division officials said.

Through a letter recently, Power Division Secretary has informed the Prime Minister’s Office (PMO) about the private sector sponsors’ failure to open letter of credits (LC) to import equipments for their projects due to liquidity crisis of the commercial banks.

Following the letter, Prime Minister Sheikh Hasina has decided to hold a meeting with the Power Division senior officials to discuss the issue, sources said. The government earlier had decided to implement the private sector power projects with 70 percent funding from foreign sources.

“We need support from the Finance Division, Banking Division and Bangladesh Bank to implement the power projects with 70 percent foreign funding,” Azad said in the letter.

In the letter, he also sought help from the central bank and other commercial banks to open LCs for the import of power project equipments.

“If the concerned authorities fail to address the issues, implementation of the power projects under the private sector in the next two years would become uncertain,” the letter said.

Prime Minister’s Power and Energy Adviser Dr Tawfiq-e-Elahi Chowdhury told daily sun that the government is still stick to its plan to produce more electricity through private sector investment.

He also said the government would assist the private sponsors in mobilising foreign funds to implement their projects.

The World Bank has already refused to finance two mega power projects at Bibyana, awarded to Summit Group, a concern of Civil Aviation and Tourism Minister Faruk Khan’s family.

Meanwhile, two other power projects awarded to Aslamul Huq, a ruling party lawmaker from Dhaka-14 (Mirpur), are yet to mobilise fund, concerned officials of Bangladesh Power Development Board (BPDB) said. The lawmaker has no previous experience in power sector.

Besides, three mega coal-based power projects owned by Orion Group have also failed to manage funds.

According to Power Division, the government has so far added 3,330MW of electricity to the national grid in last three years from 47 power projects.

The present daily demand for electricity is recorded at 6,500MW against the supply of 5,000-5500MW.

“I think it’s a failure of BPDB to sign contracts with private sponsors without ensuring foreign funding to implement the projects,” said Professor M Tamim, former special assistant on power, energy and mineral resources to the chief adviser of a caretaker government.

He said none of the local commercial banks would be able to assist funding for the projects.

The Daily Sun/Bangladesh/ 12th June 2012

The local currency depreciated by Tk 0.25 against the dollar in the past week after stability for nearly two months, treasury officials said.

The average exchange rate of the greenback rose to Tk 82.44 yesterday for import payments (bills for collection) from Tk 82.20 on June 3, according to statistics from Bangladesh Foreign Exchange Dealers Association (BAFEDA).

“Declining export earnings and payment pressures for imports, particularly fertiliser, have played a part in depreciation,” a treasury official of a private commercial bank said.

Usually, the taka depreciates when the country's import payments exceed exports and remittances. In Bangladesh, almost all of its oil demand is met by import. Recent import demand for fertiliser has put additional pressure on the exchange rate.

Exports declined 4.13 percent to $2.2 billion in May from a year earlier. Businesses pointed at the dip in demand for apparel items in the Eurozone due to the ongoing debt crisis.

A senior Bangladesh Bank official said the recent depreciation of the taka against the dollar is within limits.

“The depreciation is insignificant compared to that in India by 4-5 rupees in a month,” said the central bank official.

He hoped the exchange rate would remain at Tk 82.50 throughout June.

The taka witnessed massive depreciation -- over 16 percent -- in between January 2011 and January 2012.

The Daily Star/Bangladesh/ 12th June 2012

Bangladesh Bank Governor Dr Atiur Rahman, speaks at launching of the Islami Interbank Fund Market (IIFM) at BB’s Jahangir Alam Conference Hall in Dhaka Sunday.

Bangladesh Bank (BB) Governor Dr Atiur Rahman viewed the conventional banking as based on ‘fragile structure’ and hence, the world now rethinks of the Islamic banking in many cases.

“Even many non-Muslim countries are making the use of Islamic banking products such as ‘SUKUK’ in collecting fund from the market,” he said.

Dr Atiur Rahman came up with this view while inaugurating the transactions at Islamic Inter-banks Fund Market (IIFM) at Bangladesh Bank in Dhaka.

He said Islamic banking has seen rapid expansion in Bangladesh.

“Islamic banking system in Bangladesh currently covers 18.42 percent of total deposit and 21 percent of total asset in terms of loans and advances.”

The Islamic banks of the country have around 37.81 percent of total net inter-bank deposit, he said, adding that they also collected Tk 30 billion investment money from Islamic Bond Fund.

As the trades and businesses of Islamic banking have got expanded, BB governor emphasised the need to create inter-banking facilities for a stronger liquidity management in the Islamic banks.

BB Deputy Governor Abu Hena Md Razee Hasan presided over the function while Deputy Governor SK Sur Chowdhury and Managing Directors and CEOs of different Islamic banks, among others, were also present.

SK Sur Chowdhury said the IIFM has been launched with the objective of removing mismanagement in the liquidity system of Islamic banks.

Some of the Islamic banks and Islami wings of the conventional banks will deposit their fund in the market and others who need money will take funds from the market to meet their liquidity constraints while the central bank will play the role of custodian of the fund, he added.

Islamic bank Managing Director Mohammad Abdul Mannan said: “Today will be a red letter day in the country’s banking history as the IIFM is a long-cherished and demanded by the Islamic banks.”

He, however, demanded a separate Islamic Banking Act for the Islamic banks so that they can follow a uniform system.

The Daily Sun/Bangladesh/ 4th June 2012

Finance Minister AMA Muhith gives a crest to Bangladesh Bank Governor Atiur Rahman on behalf of Credit and Development Forum at a conference on microfinance at Bangabandhu International Conference Centre in Dhaka yesterday. Sir Fazle Hasan Abed, chairperson of BRAC, is also seen.

Microfinance institutions (MFIs) should not be dependent on an individual to function properly. These should rather create strong institutional structures and succession plans to carry out activities without their founders or leaders.

AMA Muhith, finance minister, Sir Fazle Hasan Abed, founder and chairperson of one of the largest microfinance institutions BRAC, and Qazi Kholiquzzaman Ahmad, chairman of Palli Karma-Sahayak Foundation (PKSF), shared this opinion at a national conference on microfinance yesterday.

Institutional structures should be such that organisations will run well in future even without their founders or initiators, said Muhith at the inauguration of the event.

Credit and Development Forum (CDF), a network on microfinance, organised the programme chaired by Sir Abed of BRAC, world's largest development organisation.

Bangladesh Bank Governor Atiur Rahman also spoke.

Muhith's remark came after PKSF Chairman Ahmad stressed the need for making succession plan of organisations, especially the MFIs.

Abed echoed Muhith and Ahmad, saying that initiatives should be taken to ensure institutionalisation and improve governance of the MFIs.

Institutionalisation will facilitate the MFIs to improve governance and help them come out of the limitations of depending on individuals, said Abed.

The call comes as some quarters doubt over well functioning and the future of Grameen Bank without its founder Nobel laureate Prof Muhammad Yunus. The government removed microfinance campaigner Dr Yunus from the post of managing director of Grameen Bank in March last year.

Muhith said there are cases that organisations could not function properly and carry out their activities after the departure of their initiators.

"It is a curse. We should come out of this circle," he told the gathering of hundreds of microfinance practitioners from the grassroot level at Bangabandhu International Conference Centre.

Muhith's remark came as hundreds of MFIs carry out lending activities for low-income people all over Bangladesh, dubbed as the birthplace of microloans in the world.

Over the past three to four decades, the volume of microloans soared and helped many people come out of poverty and empower women. It has also played a role in mobilising domestic savings.

Currently, two crore families are the clients of microfinance and so far Tk 270,000 crore in loans has been disbursed to these families. At present, these households have Tk 40,000 crore in loans, said CDF Chairman Md Mosharraf Hossain.

Muhith said microfinance is one of the strong tools to reduce poverty. "But sometimes we wrongly term it as the only tool," said the minister, who was also upbeat about the poor borrowers.

"The poor are better borrowers than the rich. They repay loans. They are not like rich men who gobble up funds," he said, adding that default rate of microfinance is only 2-3 percent.

But the percentage of default loans stands at 6-22 percent at conventional banks from where rich people borrow, he said.

"We are proud of the microfinance borrowers," said Muhith, adding that microloan receivers would get loans at 27 percent interest including charges, fixed by Microcredit Regulatory Authority, the regulator.

The minister, however, suggested the MFIs should avoid overlapping and cross-funding. The regulator should take initiative in this regard, he said.

Sir Abed said microfinance has expanded much. But more tasks remain to be done, he said, citing the need to expand micro insurance and pension schemes for the poor.

Abed also wanted the regulator to create mechanism such as a Credit Information Bureau (CIB) of Bangladesh Bank so that the MFIs get credit info of borrowers and avoid lending to the defaulters.

He also demanded the government give permission to set up microcredit banks.

"Time has come for it and there is a need for it. We expect that the government will consider the matter seriously. There are microcredit banks in other countries. It is not clear why such banks will not be set up in Bangladesh," said Abed.

PKSF Chairman Ahmad also backed the idea of establishing microcredit banks.

The Daily Star/ Bangladesh/ 31- May-2012