Bangladesh Bank has remodelled the Equity and Entrepreneurship Fund, scrapping the government’s equity investment provision in any project and allowing entrepreneurs to get loan at 2 per cent simple rate of interest.
The government would start accepting proposals also known as expression of interest (EoI) for granting loans from the EEF, renamed as Entrepreneurship Support Fund, from August 12 after the fund was suspended for more than a year amid surfacing of irregularities in the use of the fund.
The BB would accept EoIs for ago-based and food processing related projects, while ICT-related projects must be submitted to Investment Corporation of Bangladesh along with non-refundable bank draft or pay order of Tk 5,000 for the fund.
The central bank following consultations with stakeholders in June 14 last year and after getting approval from the finance ministry issued a set of fresh guidelines titled Entrepreneurship Support Fund (ESF) guidelines, 2018.
The BB guidelines mentioned fresh criteria for the approval of loans for food processing, agriculture, and information and communication technology-related projects.
Conditions for the financing facilities provided under the EEF fund, however, would remain unchanged.
Under the new guidelines, the loan facility ratio would remain same as it was in case of equity investments by the government.
The government would grant highest 49 per cent loan for the implementation of a project while the entrepreneurs will have to provide the rest 51 per cent of the total project cost.
The project must be completed within one and a half years after the disbursement of first instalment while the repayment will start after four years.
Repayment must be completed in eight equal instalments, two instalments in a year, within eight years of loan disbursement.
The project cost for agro-based and food processing projects must be limited to Tk 0.8 crore-Tk 5 crore range with scope for extending the facility up to Tk 12 crore for mercenary-depended projects.
The project cost for ICT-based projects must be limited to Tk 0.5 crore-Tk 5 crore.
The government in the fiscal year 2000-2001 introduced the EEF fund with Tk 100 crore to support new ventures with potential.
The central bank was the implementing authority of the fund till 2009.
Later, the operational function of the fund was transferred to the Investment Corporation of Bangladesh.
The central bank, since then, has been involved with formulating fund-management policies and monitoring the fund-investment activities.
According to officials, since its inception, the government has allocated Tk 2,000 crore in favour of the Fund until March last year. Of the money, Tk 1,513 crore was apportioned to agriculture and Tk 512 crore to information and communication technology.
A study carried out by the Bangladesh Institute of Development Studies in 2014 said that at least 77 companies which borrowed capital amounting to Tk 289 crore from the Equity and Entrepreneurship Fund were found traceless.