SMESPD Circular No. 01: Refinance Scheme against Financing to Cottage, Micro, Small and Medium (CMSME) Enterprises

1
Bangladesh Bank
Head Office
Motijheel, Dhaka-1000
Bangladesh.
Ref. No. SMESPD
SMES & Special Programs Department
SMESPD Circular No. 01 Date: 05 February 2026
22 Magh 1432
Managing Director/Chief Executive Officer
All Scheduled Banks and Finance Companies operating in Bangladesh Dear Sir, Context of Refinance Scheme against financing to Cottage, Micro, Small and Medium (CMSME) Enterprises.

1. Cottage, Micro, Small and Medium Industries (CMSME) have been making significant contributions to the economic growth of the country. This sector, being labor-intensive and capital-light, and having short production cycles, is capable of positively contributing to national income growth and job creation, including the production of import-substitute goods/services. Like other developing countries, there is great potential for the development and advancement of the CMSME sector in Bangladesh. The CMSME sector plays a significant role in transforming Bangladesh into a job-oriented and industrialized nation.

2. Creating opportunities for easy access to credit for entrepreneurs invested in the CMSME sector of the country will accelerate national economic growth. To this end, Bangladesh Bank, through scheduled banks and finance companies, ensured relatively low-interest/profit and easy credit/investment facilities for CMSME entrepreneurs by forming a Refinance Scheme of 25,000 (Twenty-Five Thousand) Crore Taka through SMESPD Circular No. 04 dated July 19, 2022. Subsequently, to remove the obstacles created in lending to the CMSME sector due to the reduction in the internal liquidity of banks and finance companies, the aforementioned Refinance Scheme was declared as a Pre-Refinance Scheme through SMESPD Circular Letter No. 02 dated January 31, 2023.

3. Through this circular, the distributed Pre-Refinance Scheme has been converted into a Refinance Scheme. Now, the following instructions will be followed in the operation of the said converted Refinance Scheme:

3.1 Naming: The scheme will be named 'Refinance Scheme against financing to CMSME sector'.

3.2 Source of Funds: Own funds of Bangladesh Bank.

3.3 Amount of Funds: 18,000 (Eighteen Thousand) Crore Taka, which will be operated as revolving. From December 2026 to December 2029, the distributed Refinance Scheme will be converted into a Refinance Scheme of 15,000 (Fifteen Thousand) Crore Taka by reducing a total of 3,000 (Three Thousand) Crore Taka (750 Crore per year) over 4 years.

3.4 Tenure of Scheme: The scheme will remain in force until further instructions are not issued.

3.5 Type and Scope of Refinancing:

3.5.1 Unorganized/semi-organized, Cottage, Micro, Small and Medium entrepreneurs defined in SMESPD Circular No. 01 dated March 17, 2025, issued by Bangladesh Bank, will be considered eligible for refinancing under this scheme for the loans (term and working capital loans) granted to them;

3.5.2 Under the Pre-Refinance Scheme, after the entire fund distributed to customers is exhausted, the concerned scheduled bank or finance company can apply for refinancing from its own funds. In this case, the concerned scheduled bank or finance company must submit a certificate stating that the entire fund distributed to customers under the Pre-Refinance Scheme has been completed (according to Annexure-1);

3.5.3 The tenure of working capital loans/investments distributed by each scheduled bank or finance company to customers will be maximum 12 (twelve) months. However, loans/investments distributed in the working capital sector can be renewed, and the concerned scheduled bank or finance company must re-apply for refinancing against the renewed loans/investments;

3.5.4 According to SMESPD Circular No. 01 dated March 17, 2025, an institution within the loan/investment limit can avail of maximum 1 term loan and 1 working capital loan/investment facility simultaneously from the fund formed under this scheme;

3.5.5 Refinancing will be done to scheduled banks and finance companies, provided there is distributable status in the fund formed under this scheme. No specific amount of funds will be allocated to any participating financial institution (PFI) participating in this scheme with Bangladesh Bank, and all previously approved but unused allocations in their favor will be considered cancelled after the issuance of this circular;

3.5.6 Defaulting borrowers will not be eligible for refinancing facilities under this scheme. The bank or finance company must ensure the classification of the borrower's loan based on the ICR report.

3.6 Interest/Profit Rate against Refinancing: The annual interest/profit rate against the refinanced funds in favor of the lending banks and finance companies under this scheme will be 2% (two percent).

3.7 Customer Interest/Profit Rate: The annual interest/profit rate imposed by scheduled banks and finance companies on customers under this scheme will be maximum 7% (seven percent). In the case of Shariah-based financing, the profit rate paid to customers must be determined under the approved Shariah investment policy, but it must not exceed 7%. Interest/profit must be imposed on the reducing balance of the customer's loan/investment.

3.8 Loan Tenure, Grace Period, and Repayment Schedule:

3.8.1 In the case of loans/investments granted under this scheme, the loan tenure will be determined by the concerned scheduled bank or finance company depending on the type of industry/service/business, and the tenure of working loans/investments will be maximum 1 year, and the tenure of term loans/investments will be maximum 7 years including the grace period.

3.8.2 In the case of term loans/investments, a grace period of 3 to 6 months can be provided based on the bank-customer relationship. However, in the case of loans/investments with a tenure of 5 years or more, a grace period of 6 to 12 months can be provided depending on the project (e.g., factory building construction) based on the bank-customer relationship;

3.8.3 The tenure of the refinancing claim must be determined in coordination with the tenure (including grace period) of the loan/investment distributed to the customer;

3.8.4 Bangladesh Bank will collect the refinancing funds (term/working capital loans/investments) along with interest/profit from banks and finance companies on a quarterly basis;

3.8.5 Scheduled banks and finance companies will collect installments of term/working capital loans/investments along with interest/profit from customers on a monthly/quarterly/semi-annual basis, excluding the grace period. If the distributed loan amount is settled by the customer before the specified tenure, the bank or finance company must inform Bangladesh Bank within the next maximum 1 (one) month mentioning the reason, and repay the entire allocated amount along with interest/profit to Bangladesh Bank.

3.9 Eligibility and Application Process for Refinancing:

3.9.1 Scheduled banks and finance companies under the said scheme must enter into a Participation Agreement with the Director (SMESPD), SMES & Special Programs Department, Bangladesh Bank, Head Office, Dhaka. The contracted bank or finance company will be considered a Participating Financial Institution (PFI);

3.9.2 The contracts of all banks and finance companies that have entered into a participation agreement with Bangladesh Bank under the previous '25,000 (Twenty-Five Thousand) Crore Taka Scheme' will remain valid, and they do not need to enter into a new contract;

3.9.3 In the case of inclusion as a Participating Financial Institution (PFI), the criteria distributed in Appendix 14.4.2 of SMESPD Circular No. 01 dated March 17, 2025, issued by Bangladesh Bank, will be applicable;

3.9.4 Bangladesh Bank can take any decision regarding the funds based on the efficiency review of the use of the distributed funds by the participating banks and finance companies;

3.9.5 Scheduled banks and finance companies must submit the application form for refinancing in the prescribed format (according to Annexure-2) to Bangladesh Bank against the loans/investments distributed under this scheme. However, the application form must be submitted by the 15th of the month following the month in which refinancing is sought against the financing. If the application is not submitted within the specified time, it must be submitted within the next maximum 2 (two) months mentioning the reason for the delay.

3.10 Security to be provided for receiving refinancing: In each case of receiving refinancing, the participating institution must provide a Letter of Commitment (LOU) for the equivalent amount of funds received as refinancing. The said Letter of Commitment will remain as current security for all funds currently or prospectively payable to the participating institution from Bangladesh Bank and any other costs, charges, or expenses (if any) legally payable to Bangladesh Bank. Even if the assessment status changes at any time, or any partial payment or less/more amount or part of the security is withdrawn, the contracts and letters of commitment executed for the loan payable to Bangladesh Bank by the participating institutions will remain as current security.

3.11 Method of repayment/advance payment/collection of refinancing:

3.11.1 The installment payable for refinancing along with interest/profit on the date specified in the repayment schedule will be collected from the current account of the concerned scheduled bank or finance company kept at Bangladesh Bank. Accordingly, the required funds must be maintained in the current account of the concerned institution;

3.11.2 If the installment cannot be collected due to insufficient funds/status in the current account of the banks and finance companies kept at Bangladesh Bank during the collection of the installment of refinancing along with interest/profit, it will be collected with an additional 2% (two percent) interest/profit on the applicable interest/profit rate imposed during the refinancing period, along with the interest/profit for the additional time, subject to the availability of funds;

3.11.3 If the concerned bank or finance company continues to avail of refinancing facilities by providing false information without timely informing the department about the settlement of the customer's consolidated loan before the specified tenure, the funds so collected will be payable in a lump sum along with interest/profit at a rate 2% (two percent) higher than the interest/profit rate imposed during the refinancing period.

3.12 Selection, Approval, Distribution, and Collection of Loans/Investments: In the selection, approval, and distribution of loan/investment recipients, execution of documents, debt-equity ratio, proper use and monitoring of Majiri loans, scheduled banks and finance companies will provide loans/investments in favor of entrepreneurs by complying with their risk management, loan policy, and other instructions of Bangladesh Bank related to this. All responsibilities for the collection of distributed loans/investments will rest with the distributing banks and finance companies. There will be no connection between the collection of loans/investments and the repayment payable to Bangladesh Bank.

3.13 Context of Cancellation of Refinancing Application: If a refinancing application is made with incomplete or false information, or if the application is found not to be proper during the inspection of the refinancing application by this department, the said refinancing application will be cancelled.

3.14 Schedule of Charges: In the case of determining fees/charges against the loans/investments granted under this scheme, the instructions of SMESPD Circular No. 01 dated March 17, 2025, issued by this department will be followed.

3.15 Monitoring: Scheduled banks and finance companies must regularly monitor matters related to customer distribution, collection, and proper use of loans/investments distributed by them, and the funds of loans/investments must not be used for consolidating any other loan/investment in any way. Additionally, this department will demand relevant documents and conduct field inspections from time to time and as necessary, before or after the approval of refinancing.

4. Other Terms:

4.1 Under this scheme, it must be ensured that all customer loan/investment distribution processes are properly complied with the instructions distributed in SMESPD Circular No. 01 dated March 17, 2025, issued by this department;

4.2 If the refinanced funds under this scheme are used in any sector other than under SMESPD Circular No. 01/2025, or if the distributed policies are not followed in the case of granting loans/investments, or if any term is violated, or if any information is concealed, or if false information is provided, Bangladesh Bank will collect a lump sum along with interest/profit at a rate 2% (two percent) higher than the interest/profit rate imposed during the refinancing period.

5. In the case of refinancing/pre-refinancing financed before the issuance of this circular, the instructions of the aforementioned circular/circular letter will be applicable.

6. These instructions are issued under the powers granted by Section 45 of the Bank Company Act, 1991, and Section 41 of the Finance Company Act, 2023.

These instructions will come into force immediately.

Yours faithfully,
(Nawshad Mostafa)
Director (SMESPD)
Phone: 9530502 dir.smespdb@bb.org.bd

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Annexure-1
Ref: ----------------- Date: -------------
Director (SMESPD)
SMES & Special Programs Department
Bangladesh Bank
Head Office
Dhaka.
Sir,
Context of Certificate for obtaining refinancing from 'Refinance Scheme in CMSME Sector'.

Following the instructions of SMESPD Circular No. 00 issued on ----------------- Date regarding the subject above, the institution has distributed a total of ---------- Taka in loans/investments in favor of ----- CMSME entrepreneurs for ----- persons from ------- Date to ------ Date using its own funds.

It is mentioned that the entire fund of ---------- Taka obtained from the Pre-Refinancing of the 25,000 Crore Taka (Twenty-Five Thousand Crore Taka) scheme in the CMSME sector has been distributed in favor of ----- CMSME entrepreneurs, and no further funds are remaining in this distribution.

Yours faithfully,
(---------------------------)
Managing Director
------- Bank/Finance Company
Phone: ----------------------
E-mail: --------------------------

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Annexure-2
Ref: ----------------- Date: -------------
Director (SMESPD)
SMES & Special Programs Department
Bangladesh Bank
Head Office
Dhaka.
Sir,
Context of Application for obtaining refinancing from 'Refinance Scheme in CMSME Sector'.

Following the instructions of SMESPD Circular No. 00 issued on ----------------- Date regarding the subject above, the institution has distributed a total of ---------- Taka in loans/investments in favor of --------- CMSME entrepreneurs for ----- persons from ----------------- Date to -------------- Date using its own funds. Against the said financing, detailed information according to Annexure-3(a) and 3(b) is submitted herewith for obtaining refinancing from the said Refinance Scheme.

Application Date in E-Refinance System
Tracking Number
Customer Number
Claimed Amount of Refinancing
Remarks

In the aforementioned situation, please be kind enough to provide a total of -------------- Taka (---------------- in words) refinancing in favor of this bank/finance company according to the attached schedule.

Yours faithfully,
(---------------------------)
Managing Director
------- Bank/Finance Company
Phone: ----------------------
E-mail: --------------------------
Annexure: According to Schedule

Annexure-2(a)
Schedule of Loans/Investments Distributed to CMSME Entrepreneurs under the Refinance Scheme

1. Name of Bank/Finance Company
2. Name of Participating Institution
3. Date of Distribution
4. Details of Loans/Investments Distributed:
   Type of Loan
   Tenure of Loan
   0-1 Year
   1-3 Years
   3-7 Years
   Total
5. Details of Loans/Investments Distributed to CMSME Entrepreneurs:
   Type of Loan
   Tenure of Loan
   0-1 Year
   1-3 Years
   3-7 Years
   Total
6. Total Number of CMSME Entrepreneurs Benefiting from Loans/Investments Distributed
7. Total Number of Beneficiaries of Loans/Investments Distributed
8. Details of Loans/Investments Distributed to CMSME Entrepreneurs:
   Type of Loan
   Tenure of Loan
   0-1 Year
   1-3 Years
   3-7 Years
   Total
9. Number of CMSME Entrepreneurs who are Defaulters (Yes/No)
10. Details of Loans/Investments Distributed:
    Type of Loan
    Tenure of Loan
    0-1 Year
    1-3 Years
    3-7 Years
    Total

Annexure: Annexure-2(b)

Schedule of Loans/Investments Distributed:

1. Name of Bank/Finance Company
2. Name of Participating Institution
3. Date of Distribution
4. Details of Loans/Investments Distributed:
   Type of Loan
   Tenure of Loan
   0-1 Year
   1-3 Years
   3-7 Years
   Total
5. Details of Loans/Investments Distributed to CMSME Entrepreneurs:
   Type of Loan
   Tenure of Loan
   0-1 Year
   1-3 Years
   3-7 Years
   Total
6. Total Number of CMSME Entrepreneurs Benefiting from Loans/Investments Distributed
7. Total Number of Beneficiaries of Loans/Investments Distributed
8. Details of Loans/Investments Distributed to CMSME Entrepreneurs:
   Type of Loan
   Tenure of Loan
   0-1 Year
   1-3 Years
   3-7 Years
   Total
9. Number of CMSME Entrepreneurs who are Defaulters (Yes/No)
10. Details of Loans/Investments Distributed:
    Type of Loan
    Tenure of Loan
    0-1 Year
    1-3 Years
    3-7 Years
    Total

Annexure-2(b)

Schedule of Loans/Investments Distributed:

1. Name of Bank/Finance Company
2. Name of Participating Institution
3. Date of Distribution
4. Details of Loans/Investments Distributed:
   Type of Loan
   Tenure of Loan
   0-1 Year
   1-3 Years
   3-7 Years
   Total
5. Details of Loans/Investments Distributed to CMSME Entrepreneurs:
   Type of Loan
   Tenure of Loan
   0-1 Year
   1-3 Years
   3-7 Years
   Total
6. Total Number of CMSME Entrepreneurs Benefiting from Loans/Investments Distributed
7. Total Number of Beneficiaries of Loans/Investments Distributed
8. Details of Loans/Investments Distributed to CMSME Entrepreneurs:
   Type of Loan
   Tenure of Loan
   0-1 Year
   1-3 Years
   3-7 Years
   Total
9. Number of CMSME Entrepreneurs who are Defaulters (Yes/No)
10. Details of Loans/Investments Distributed:
    Type of Loan
    Tenure of Loan
    0-1 Year
    1-3 Years
    3-7 Years
    Total

Annexure: According to Schedule