NRBs, World Bank, ADB, European Union to give funds

Bangladesh Bank is going to introduce four new refinance and pre-finance schemes of Tk 1,000 crore for small and medium entrepreneurs in a bid to boost the country’s SME sector, said officials.
A BB official told New Age on Sunday that non-resident Bangladeshis, World Bank, Asian Development Bank and European Union would give financial support to create the refinance and pre-finance schemes.
The central bank will collect Tk 400 crore from the NRBs to create a refinance scheme in cooperation with the United Nations Capital Development Fund, he said.
‘The BB will be able to bring the NRBs fund in the country under the initiative. The central bank has already held a meeting with the UNCDF in this regard,’ he said.
The official said the NRBs would get 1 per cent interest for their investment in the scheme.
The BB will disburse the fund to the scheduled banks with 5 per cent interest and clients will receive the fund with 10 per cent interest from the banks, he said.
The ADB will give Tk 100 crore to the government and the central bank will use the fund as refinance scheme to increase skill and business capacity of the SME clients.
The ADB will provide the fund by June with 0.75 per cent interest.
Under this refinance scheme, the central bank will train up around 10 lakh entrepreneurs and bankers across the country in a bid to create awareness of the SME business among them, the BB official said.
The EU will also provide Tk 200 crore to the government to stimulate the SME activities, he said.
The BB official said high officials of the EU felt encouraged to provide the fund after attending the women entrepreneurs conference and products display held on March 13, 2014 at the Ruposhi Bangla Hotel in the capital.
The EU will conduct a survey before giving the fund and the survey team will come in the next month, the official said.
The World Bank will provide Tk 170 crore as pre-finance fund to the government and the central bank will utilise the fund, he said.
The rural clients will use the fund to rebuild their houses, he said.
The BB will disburse the fund to the clients through both the banks and non-government organisations.
The official said that the fund would not relate directly to the SME activities, but it would help spur the clients’ business.
The World Bank will impose 0.75 per cent interest on the fund and the banks will disburse the fund with the highest 10 per cent interest.
Clients, however, will count 12 per cent interest if they receive the loans from the NGOs.
The BB official said that the cost of fund of NGOs was high than the banks, so they (NGOs) would impose higher interest rate.
BB SME and special programmes department general mananger Md Masum Patwary told New Age on Sunday that the four refinance and pre-finance funds would be introduced in the quickest possible time.
The country’s SME clients will be able to get more loans with lower rate of interest once the schemes are launched, he added.

'The new banks are also facing difficulties in getting business as per expectation mainly due to the higher interest on loans'

Bad loans and weak governance to blame

Scam-hit BASIC Bank has made loans more expensive than any of the 56 banks operating in the country, according to latest data of Bangladesh Bank
The state-owned bank's weighted average interest rate on loans stood at 16.37 percent on March 31 this year, up by more than 3 percentage points than the average rate of all banks.
BASIC's interest rate spread, which is the difference between lending and deposit rates, is also highest among all eight state-owned banks. Its spread was 5.55 percent at the end of March, against the industry average at 5.15 percent.
“Bad loans and weak governance in the bank pushed its interest rate up,” said Monzur Hossain, senior research fellow at Bangladesh Institute of Development Studies.
At the end of December 2013, BASIC's nonperforming loans stood at 11.82 percent or Tk 1,282 crore of its total loans, down from 18.43 percent or Tk 1,863 crore in the previous quarter.
The credit for the fall in NPL goes to the central bank, which had relaxed loan rescheduling rules in December 2013 to safeguard businesses affected by political unrest. The BB move helped all banks, especially the state banks burdened with bad loans, reduce their NPL.
“But in reality, BASIC Bank's NPL will be no less than 40 percent of its total loans,” an official of the bank said, requesting not to be named.
The official said, before 2009 BASIC's NPL had never crossed 5 percent of its total loans.
He said it had been the best state-owned bank till 2009 when the Awami League-led government formed a new board of directors headed by Sheikh Abdul Hye Bacchu.
According to insiders in the bank, BASIC has lent around Tk 8,500 crore since September 2009. Of the amount, nearly Tk 4,500 crore are bad loans and may never be recovered.
“The bank charges higher rates from its clients to show profits. But why will people borrow at this high rate?” questioned a managing director of a private bank.
“It means borrowers are taking loans from the bank not to pay back,” he said.

ISLAMABAD: The World Bank said on Friday it had approved a $1 billion loan for Pakistan and “envisages” another $11 billion package spanning five years.

The loans are meant to support Pakistan’s struggling energy sector and bolster its efforts to increase growth and investment and arrest poverty.

“The World Bank Group approved a package of assistance worth US$1 billion to support Pakistan’s economic reforms on Thursday,” the bank said in a statement.

“The assistance package consists of two development policy credits (DPCs) to support the government of Pakistan’s efforts to improve the power sector, and reinvigorate growth and investment for reducing poverty and building shared prosperity,” it said.

The bank also said it was “envisaging” $11 billion worth of loans under a new country partnership strategy for Pakistan over the next five years, covering fiscal years 2015 to 2019.

The government, however, said the World Bank had approved the $11 billion partnership strategy to tackle its four main challenges of energy, economy, education and fighting extremism.

“The other landmark achievement of the day was the approval of country partnership strategy under which Pakistan will get US$11 billion in the shape of project loans and budgetary support,” it said.

Finance Minister Ishaq Dar has “congratulated the whole nation on this success and observed that the country partnership strategy is aligned fully with the vision of Pakistan’s development challenges around the four Es ‘Energy, Economy, Extremism and Education’, based on the manifesto of the Pakistan Muslim League (N) and its commitment to the nation,” it said.

Philippe Le Houerou, vice president for the Bank’s South Asia region, praised Pakistan for stabilising its economy and starting reforms in the power sector.

“The government of Pakistan deserves appreciation for stabilising the economy, initiating reforms in the power sector as well as revenue mobilisation and drawing in the private sector for spurring growth”, Le Houerou said in a statement. 

The targets were calculated by subtracting government and agriculture loans from the total loan status of each of the banks

Bangladesh Bank has set a total credit limit of Tk6,186 crore for four state-owned banks for this year.

Based on adjusted loan status of the previous year, the central bank has set separate credit targets for the banks - Sonali, Agrani, Janata and Rupali – with signing separate memorandum of understandings (MoU) recently.

The targets were calculated by subtracting government and agriculture loans from the total loan status of each of the banks.

As the banks are to disburse certain amount of loans to the government and agriculture sector every year, the ceiling of bank credit is determined on the basis of the adjusted loans so the banks could disburse loans in other sectors, said a senior executive of Bangladesh Bank. 

He said the central bank has tightened regular monitoring on aggressive loan disbursements, although most of the banks have failed to achieve the growth target last year due to overall slower credit growth in the country amid sluggish investment climate and political unrest.

“As a result, the central bank did not extend the credit ceiling of most of the banks so they could fully comply with their respective targets and other conditions set by the central bank.”

All the four banks failed to achieve the credit growth target set by the central bank in 2013, excepting Rupali Bank. Considering the credit disbursement performance of the banks,

Bangladesh Bank did not expedite the new ceiling for Agrani and Janata, rather it has cut the credit limit for Sonali Bank.

The credit target has been increased only for Rupali Bank as it had surpassed the loan ceiling fixed for last year. The credit ceiling of Sonali Bank has been set at Tk1,328 crore for the year 2014, which is 6% of the adjusted loan status of Tk22,133 crore in 2013.

The adjusted loan growth rate of Sonali Bank was negative 7.07% in the last year against the target limit of 8% set by Bangladesh Bank. The total loan growth of the banks decreased by 11.67% or Tk3,963 crore in the last year.

The loan disbursement limit of the Agrani Bank has been set at Tk1,676 crore for the year 2014, whichi is 10% of the adjusted loan status of Tk16,764 crore of 2013.

Adjusted loan growth rate of Agrani Bank was negative 0.63% during the last year against the target limit of 10%. Total loan disbursement of the bank reduced by 7.76% or Tk1529.44 crore in the year 2013.

The credit limit of the Janata Bank has been set at Tk2,206 crore for the year 2014, which is 10% of the adjusted loan status of Tk22,067 crore of 2013.

The growth target of the Janata Bank was same in the last year but the bank was able to achieve only 1.15% of its target. The total loan disbursement of the bank was reduced by 8.59% or Tk2,405 crore in the year 2013. The central bank set the credit limit of the Rupali Bank at Tk976 crore for the year 2014, which is 12% of the total adjusted loan status of Tk8,139 crore of 2013.

The adjusted loan growth of the bank increased by 13.98% in the year 2013 against its 10% target limit of the adjusted loan status set in the MoU. The total loan growth of the bank increased by 18.59% or Tk1,613 crore in the last year.

The central bank punished the Rupali Bank asking it to block the excess loans that it had disbursed beyond its target limit.

News:Dhaka Tribune/30-Apr-2014