The central bank has introduced a new long-term financing facility to support private sector firms, particularly export-oriented manufacturers, in borrowing USD for purchasing equipment and services needed for sustainable operations. The facility, known as the Bangladesh Bank-Long Term Financing Facility (BB-LTFF), allows loans of up to $10 million in USD. The initiative aims to address the funding gap faced by businesses due to shorter-tenure loans and provides access to longer-term credit for capital-intensive manufacturing firms.
The success of a previous long-term financing program highlights the significant demand for sustainable credit options in the market. The central bank will continue to offer such financing to private sector firms, with a focus on export-oriented manufacturing, to enhance their competitive advantage in global value chains and promote sustainable production methods.
Participating financial institutions (PFIs), authorized to handle foreign exchange, will facilitate the financing process. Eligible PFIs must meet certain qualifications, including a minimum CAMELS rating of three or better, less than 8% non-performing loans, and compliance with minimum regulatory capital adequacy requirements. Banks with problematic histories, financial scandals, or central bank observers or coordinators are ineligible to participate.
Loans disbursed before January 1, 2021, are not eligible for refinancing from this fund. Borrowers can apply for the BB-LTFF through a single PFI for amounts up to $5 million or through multiple PFIs for amounts up to $10 million in syndicated financing.
The funds can be utilized to purchase capital machinery, cover installation expenses, and expand or establish new manufacturing industries. Additionally, the facility supports the purchase of ocean-going vessels and specialized transport vehicles for goods transportation and the establishment of businesses compliant with environmental and social standards. However, funding will not be provided for projects with adverse impacts on land acquisition, involuntary resettlement, indigenous people, or sources of livelihood.
The loan maturity will range from three to ten years, including the grace period, which cannot exceed one year. The interest rates for PFIs are based on an indicative pricing range linked to the 180-day average SOFR (Secured Overnight Financing Rate) plus a spread of 0.25% to 1.25%. PFIs will determine loan interest rates based on their borrowing costs, operational expenses, and a risk-adjusted spread and profit margin of 1% to 2% above the cost of funds.