Bangladesh will reduce interest rates by at least 50 percent to below double digits for bank loans for small and medium scale enterprises (SME), a senior government official said on Monday.
"The decision which will come into effect from next month and after that no bank or financial institution will be allowed to charge 10 percent or above for loans invested in the SME sector," said Mohammad Ayub Miah, managing director of the state-run SME Foundation.
He said with the help of the Asian Development Bank and World Bank the government has created a 5 billion taka ($73 million) fund reserved for the SME sector of which 10 percent must go to women entrepreneurs. All the stake holders of the fund including the Bangladesh government have already approved the decision to lower the interest rates, he said.
"Both the SME and women entrepreneurs are very important for us as the sector contributes more than 25 percent in the economy," he told a meeting attended by business leaders and women entrepreneurs. Ayub, also a government secretary, said the SMEs were the biggest employer in Bangladesh and created job opportunities for more than 8.5 million in 95,000 enterprises across the country.
"The central bank allocated funds to other commercial banks with only 5 percent interest rates for the women entrepreneurs, but they are charging up to 20 percent, and also demand collateral for the loans," said Selima Ahmed, president of Bangladesh Women Chamber of Commerce and Industry.