SMESPD Circular Letter No. 01: Compliance of the directions related to considering Personal Guarantee as Supplementary Collateral

SMESPD Circular Letter No. 01
Date: Poush 04, 1426
December 19, 2019

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

Dear Sir,

Regarding compliance with directions on accepting 'Personal Guarantee' as Supplementary Collateral.

Reference is made to the Master Circular on Financing for Cottage, Micro, Small and Medium Enterprises (SMESPD Circular No. 2) issued on September 05, 2019, on the subject mentioned above.

2. Paragraph 7.1 of the aforementioned Master Circular provides directions for considering personal guarantee as supplementary collateral in the case of providing collateral-free loans to micro-entrepreneurs. It also mentions that customers should not be forced to provide more than one personal guarantee.

However, it has been observed recently that in the case of considering personal guarantee as supplementary collateral, banks and financial institutions are applying pressure or forcing entrepreneurs to provide guarantees from more than one and specific individuals (e.g., senior officials, wealthy relatives, spouses, etc.). Consequently, obtaining loans for micro-entrepreneurs has become difficult, and the development of the CMSME sector is also being hindered, which is not desirable in any way.

3. In this regard, you are advised to properly comply with the discussed directions regarding considering 'Personal Guarantee' as supplementary collateral in the case of providing loans, and not to apply any pressure or force micro-entrepreneurs to provide guarantees from specific individuals.

Yours faithfully,

(Lila Rashid)
General Manager
Phone: 9530502