Bangladesh Bank has created a special pre-finance fund of Tk 2,000 crore to strengthen the country's frozen food export sector, diversify export products and increase foreign exchange earnings. Entrepreneurs will be able to borrow from the fund, financed by the central bank itself, at a maximum interest rate of 7 per cent.

The information was given in a circular issued by Bangladesh Bank on Sunday, 31 August.

The circular said frozen food exporters face money locked up for long periods, extra costs of stockholding and storage, high cold-chain management costs and limited access to low-interest finance. The new facility has been introduced to tackle these problems and raise the sector's capacity.

All scheduled banks in the country can take part. For a completely new factory, entrepreneurs can get term loans of up to Tk 30 crore for up to seven years, including a one-year grace period. The entrepreneur must contribute own capital to the total project financing, with a maximum debt-to-equity ratio of 70:30.

For renovating, expanding or modernising an existing frozen food factory, term loans of up to Tk 20 crore can be taken for up to five years, including a one-year grace period. Here too the maximum debt-to-equity ratio is 70:30.

Working capital loans of up to Tk 20 crore will be given for buying raw materials, paying workers' and staff wages and allowances, and paying electricity, gas and other utility bills. These loans run for one year but can be renewed once given a satisfactory transaction record, so they can stay in place for up to two years in all.

To build environment-friendly production, extra credit is available to entrepreneurs who want to install solar panels: up to Tk 5 crore or 30 per cent of the main project cost, whichever is lower.

Participating banks will receive pre-finance from the Bangladesh Bank fund at 4 per cent interest, and the maximum interest rate for customers has been set at 7 per cent. The central bank says this will give frozen food exporters long-term finance at relatively low cost.

Banks have been told to give priority to frozen food exporters that have partly or fully halted production because of a shortage of working capital.

Loan defaulters will not get the facility. Those in the same sector already receiving finance from the Export Development Fund (EDF) or the Export Facilitation Pre-finance Fund (EFPF) cannot borrow from the new fund for the same sector.

To receive money from the fund, factories must have the approvals and clearances of the Department of Fisheries, the Department of Environment and other relevant government authorities.

The circular said that if the fund's special conditions are not properly complied with, the institution concerned will be barred in future not only from this fund but from loans under any other Bangladesh Bank fund.

Bangladesh Bank hopes the new facility will raise production capacity in the frozen food sector, encourage new investment and widen the range of Bangladeshi products in export markets. It also expects it to create jobs and business activity in the rural economy.

Source: Jagonews24. First published in Bengali on The Agro News.