Bangladesh Bank Flips the Funding Order on Its Tk20,000 Crore Factory Revival Scheme After Banks Barely Touch It

Five months after Bangladesh Bank launched a Tk 20,000 crore lifeline for shuttered factories, barely 7 percent of that money has reached, or is on its way to, a borrower. Rather than wait out a slow start, the central bank has rewritten how the scheme works, flipping who pays first, renaming it entirely, and adding a stack of new paperwork that borrowers and lending banks will both have to clear.

• As of October 15, only Tk 560.93 crore had been disbursed and Tk 929.50 crore more was in process, together about 7 percent of the Tk 20,000 crore allocation.
• Banks must now lend their own money first and seek reimbursement from Bangladesh Bank afterward, reversing the original upfront funding model.
• The scheme has a new name, the Closed Industry and Service Sector Support Refinancing Scheme, replacing the earlier Pre-financing Scheme.
• New rules require board level approval for loans, a one week refinancing application window, and signed declarations against money laundering and fund diversion.

A fund that launched fast and moved slowly

Bangladesh Bank rolled out the fund on June 4 as a three year revolving facility meant to help businesses that had shut down or were struggling with cash flow strain reopen and stay open. The mechanics were straightforward on paper: banks would draw from the central bank at 4 percent interest and lend it on to qualifying borrowers at up to 7 percent, a spread meant to make the scheme attractive to lenders while keeping borrowing costs manageable for struggling firms. Five months in, the amount actually reaching businesses tells a different story. Disbursed loans stood at Tk 560.93 crore by October 15, with another Tk 929.50 crore somewhere in the pipeline, a combined Tk 1,490.43 crore against a Tk 20,000 crore allocation, roughly 7 percent.

What is actually changing

The most consequential change is who fronts the money. Under the original design, Bangladesh Bank provided funds to lending banks upfront, which banks then disbursed to borrowers. Under the new rules, banks must disburse from their own balance sheets first and only then apply to Bangladesh Bank for refinancing, with a one week window to submit that application and a 15 day extension available for valid reasons. In effect, banks now carry the initial funding risk that the central bank used to absorb, which should sharpen their due diligence on which borrowers actually qualify, but may also make banks more cautious about lending at all given that reimbursement is no longer guaranteed in advance.

Alongside the funding reversal, the scheme has been renamed from the Pre-financing Scheme to the Closed Industry and Service Sector Support Refinancing Scheme, a title that more plainly states who it is for. Loans now require approval from a bank's board or a board empowered executive committee before disbursement, adding a layer of institutional sign off that was not explicit before. Borrowers get priority access at the specific bank that financed their original project, all transactions must run through escrow or revenue accounts rather than general operating accounts, and applicants must now sign declarations stating they have not been involved in money laundering, fraud, fund diversion, or loan misuse.

Reading between the lines

Bangladesh Bank has not publicly stated why it made these changes, but the timing, alongside a disclosure that only 7 percent of the fund had moved by mid October, makes the likely motivation hard to miss. A scheme that was supposed to revive closed factories quickly has instead moved at a crawl, and the central bank appears to be betting that tighter underwriting, clearer accountability and anti fraud declarations will get money moving to borrowers who can actually use it, even if that means a slower approval process for each individual loan. Whether tightening the rules speeds up or further slows disbursement is an open question: banks facing new funding risk and extra paperwork may become more selective rather than more active, at least in the near term.

The scheme's new name, the "Closed Industry and Service Sector Support Refinancing Scheme," makes explicit what the Pre-financing Scheme's original title left vague, that this money is meant specifically for businesses that have already shut down or are at risk of doing so.

What it means for you

If you own or manage a factory or service business that shut down or is struggling to stay open, the practical change is that your bank now needs to approve and fund your loan from its own resources before it can recover that money from Bangladesh Bank, so expect more scrutiny of your application and plan for a board level sign off step that did not exist before. If you are a banker handling these applications, the one week refinancing window means internal processes need to move faster even as approval requirements get stricter, a genuine operational squeeze. If you are simply watching Bangladesh's industrial recovery from the outside, the 7 percent disbursement rate after five months is a clearer signal of how much slack remains in the country's broader effort to reopen closed factories than any single policy announcement, and it is worth revisiting this figure again once the new rules have had a few months to take effect.