CGD Circular Letter No. 01: Circular on Reducing Guarantee Fee against Credit Guarantee Facilities in CMSMEs and Financial Inclusion Sector

Chief Executive/Managing Director All Scheduled Banks and Financial Institutions operating in Bangladesh.

Dear Sir,

Regarding the Guarantee Fee against Credit Guarantee Facilities in Cottage, Micro, Small and Medium Enterprises (CMSMEs) and Financial Inclusion Sector.

Reference is drawn to your attention to CGD Circular Letter No. 01 dated: 8 November 2023 on the subject cited above.

2. In the aforementioned circular, instructions are provided regarding the Guarantee Fee payable annually by Banks/Financial Institutions under the bilateral participation agreement concluded between the Credit Guarantee Department and Banks/Financial Institutions through sub-clauses 4.6(a) and (b).

3. The CMSME and Financial Inclusion sector is making significant contributions to economic growth, reducing wealth and regional disparities, and ensuring inclusive development including women's empowerment. It has been observed that there is a need to reduce the fee payable against guarantee facilities to make credit guarantee facilities more cost-effective and accessible to entrepreneurs in the CMSME and Financial Inclusion sector.

4. Accordingly, the following instructions are issued: Participating Banks/Financial Institutions in the Credit Guarantee Scheme shall pay a guarantee fee at the rate of 0.50 percent on the credit guarantee registered loans for the first one year. Subject to the guarantee remaining active, after the first one year has elapsed, the guarantee fee shall be paid annually at the rate of 0.25 percent on the total outstanding principal balance of the guarantee-availing loans as of the immediately preceding day.

5. Except for the instructions mentioned in paragraph 4, other instructions of CGD Circular Letter No. 01/2023 shall remain unchanged.

6. These instructions are issued under the powers conferred by Section 45 of the Banking Company Act, 1991 and Section 18 of the Financial Institution Act, 1993.

These instructions shall come into effect immediately.

Yours faithfully,

(Nahid Rahman) Director (CGD) Phone: 9530179

Bangladesh Bank (Central Bank of Bangladesh) Head Office Motijheel, Dhaka-1000 Bangladesh

Ref No.: 17.04.0000.008.01.001.24-14 Credit Guarantee Department CGD Circular Letter No. 01 1 July 2024 Date: ----------------- 17 Asharh 1431