Circular No. 01 Dated 16 July 2023 Issued by the Financial Sector Support and Strategic Planning Department of the Bangladesh Bank On “Long-Term Financing Facility”

In light of the notable success achieved through the completion of the long-term financing facility (“LTFF”) program under the Financial Sector Support Project, the Bangladesh Bank (“BB”) has decided to extend its provision of long-term financing support to private sector firms, particularly those in export-oriented manufacturing industries.

The primary objectives of this initiative are to stimulate employment opportunities, foster industrial growth, and drive the real output of the economy. Additionally, the program aims to facilitate the sustainable adoption of digital transformation in line with the principles of the Fourth Industrial Revolution in Bangladesh.

The financing will be facilitated through banks authorized to engage in foreign exchange transactions, referred to as participating financial institutions (“PFIs”). To be eligible to participate, PFIs must meet several qualifications. These include having a minimum rating of three or better in capital adequacy, asset quality, management, earnings, liquidity, and sensitivity ratings, as determined by the BB. Additionally, PFIs must maintain a proportion of non-performing loans of less than 8% and comply with the minimum regulatory capital adequacy requirement. Problematic banks, such as those involved in major financial scams, or those under the observation or coordination of the BB are not eligible to participate.

Refinancing of loans disbursed before 1 January 2021 using the fund is not allowed. Borrowers can apply for BB-Long Term Financing Facility (BB-LTFF) with a maximum limit of $5 million through a single Participating Financial Institution (PFI), and up to $10 million under syndicated financing through multiple PFIs.

Under the BB-LTFF, loans amounting to as much as US$10 million will be offered in US currency based on the provided guidelines.

The fund can be utilized for various purposes, such as procuring capital machinery, covering installation expenses, and facilitating the expansion or establishment of new manufacturing industries. It also supports the acquisition of ocean-going vessels and specialized transport vehicles for transporting domestically-manufactured goods, as well as the establishment of businesses that adhere to environmental and social standards.

However, financing will not be provided for loans that have direct economic, social, or environmental impacts, such as those involving land acquisition, involuntary resettlement, affecting indigenous communities, and leading to the loss of income sources or livelihoods.

The loans offered through the BB-LTFF will have a maturity period of three to ten years, which includes the grace period. The PFIs will be responsible for determining the specific grace period for individual projects based on projected cash inflows, ensuring it does not exceed one year.

Regarding interest rates, PFIs will be subject to an indicative pricing range of plus 0.25% to 1.25% of the 180-day average Secured Overnight Financing Rate, which is the benchmark interest rate for dollar-denominated derivatives and loans, replacing the London Interbank Offered Rate.

PFIs will independently set the loan interest rates for borrowers, taking into account their borrowing costs and operational expenses, and incorporating a reasonable risk-adjusted spread and profit margin ranging from 1% to 2% above the cost of funds.