Circular No. 04: CMSME Working Capital Refinance Fund

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Bangladesh Bank Head Office Motijheel, Dhaka-1000 Bangladesh.

Ref: SMSPD Circular No. 04 SME & Special Programs Department 08 June 2026

To Managing Director / Chief Executive Officer All Scheduled Banks operating in Bangladesh

Dear Sir,

Context of Working Capital Refinance Fund in the CMSME Sector.

1. Cottage, Micro, Small and Medium Enterprises (CMSME) are one of the driving forces of the country's economy. Due to being labor-intensive and capital-light, and having short production cycles, this sector is capable of making positive contributions to national income growth and job creation, including the production of import-substitute goods/services. However, in reality, the supply of working capital in this sector is disrupted compared to demand, which is hindering the development of this sector as well as job creation.

2. In this context, to promote job creation and the development of the CMSME sector in the country, a revolving working capital refinance fund of 5,000 (Five Thousand) Crore Taka has been formed from the surplus liquidity of scheduled banks under the management of Bangladesh Bank to ensure relatively low-interest/profit and easy working capital loan/investment facilities for entrepreneurs in this sector. The following guidelines will apply to this refinance fund applicable to scheduled banks operating in Bangladesh:

2.1 Name of the Fund: 'Working Capital Refinance Fund in the CMSME Sector.'

2.2 Source of the Fund: Fund formed from the surplus liquidity of scheduled banks under the management of Bangladesh Bank.

2.3 Objective of the Fund: To increase the capacity of operational CMSME institutions to run production/service/business activities by providing necessary working capital loans/investments, and to accelerate the slow-moving economy through direct and indirect job creation in the country.

2.4 Amount of the Fund: 5,000 (Five Thousand) Crore Taka, which will be managed as revolving (revolving).

2.5 Tenure of the Fund: 3 (three) years from the date of issuance of the circular.

2.6 Type and Scope of Refinance: Working capital loans/investments in favor of CMSME customer institutions as per SME & Special Programs Department Circular No. 01 dated 17 March 2025. Applications for refinance can also be made against renewed working capital loans/investments.

2.7 Interest/Profit Rate and Payment Process against Refinance: Banks must pay interest/profit at a rate of 4% (four percent) against the refinanced funds under this fund, which will be charged on a quarterly basis (based on March, June, September, and December). In this regard, although interest is charged on a quarterly basis, if a grace period is provided to the customer for loan disbursement, Bangladesh Bank will consider the corresponding period as a grace period and collect the installment of principal and interest/profit on a subsequent quarterly basis.

2.8 Customer Interest/Profit Rate, Other Charges, and Grace Period:

2.8.1 The interest/profit rate charged by banks to customers under this fund shall be maximum 9% (nine percent). Banks shall provide investment under this fund to customers based on their approved investment methods without deviating from the percentage of this circular, for investments operated on an Islamic Shariah basis and other approved investments by banks through Islamic banking methods;

2.8.2 A grace period of 03 or 06 months may be provided under the subject fund. In that case, although interest is charged on a quarterly basis, installment collection must start after the grace period expires;

2.8.3 No other type of charge or fee may be collected from the customer except the charges/fees mentioned in the existing policy regarding Schedule of Charges issued by Bangladesh Bank.

2.9 Eligibility of Customers for Loan Receipt:

2.9.1 Generally, operational CMSME institutions, but CMSME institutions that are unable to run production/service/business activities due to lack of necessary working capital, will receive working capital loan/investment facilities under this fund;

2.9.2 If any CMSME customer currently has working capital loan/investment facilities from any other refinance/pre-refinance or similar scheme/fund of Bangladesh Bank, banks may provide loans under this fund within the customer's credit limit after proper verification of those customers' loan demands;

2.9.3 Borrowers identified as Non-Performing Loans (NPL) in the CMSME sector will not be considered eligible for loan receipt under the subject fund.

2.10 Eligible Institutions for Receiving Refinance:

2.10.1 All scheduled banks operating in Bangladesh will be considered eligible to receive refinance facilities from this fund. However, banks whose loan-to-deposit ratio exceeds 70% will be given priority in receiving refinance from the subject fund. In this regard, the limits specified by Bangladesh Bank for CRR/SLR must not be exceeded under any circumstances;

2.10.2 Scheduled banks under the subject fund must sign a Participation Agreement (hereinafter referred to as 'PA') with the Director (SME & Special Programs Department), Bangladesh Bank, Head Office, Dhaka. The participating bank will be considered an Authorized Financial Institution (AFI).

3. Others:

3.1.1 All liabilities for the collection of loans distributed to customers shall rest with the loan-distributing banks. Bangladesh Bank's claims shall not be linked with the collection of customer loans;

3.1.2 To reduce loan risk, banks may cover the working capital loans/investments provided to customers with collateral as needed;

3.1.3 From time to time or as necessary, this department will demand relevant documents before or after approving refinance under the subject fund and will conduct on-site inspections for the proper use of loans;

3.1.4 In the selection of customers and distribution of working capital loans/investments under this fund, the instructions of SME & Special Programs Department Circular No. 01 issued on 17 March 2025 and other applicable instructions of Bangladesh Bank shall be followed.

4. These instructions are issued under the powers conferred by Section 45 of the Bank Company Act, 1991.

These instructions shall come into force immediately.

Yours faithfully,

(Nawshad Mostafa) Director (SME & Special Programs Department) Phone: 9530502

smspd@bb.org.bd