Tk 2,000 crore pre-financing fund formed for frozen food exporters

Bangladesh Bank has built a Tk 2,000 crore revolving pre-financing fund to support the country’s frozen food industry, particularly shrimp and fish exporters.

The fund will provide financing at a maximum of 7 percent, while participating banks will receive the funds from the central bank at 4 percent interest.

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The initiative is aimed at easing some of the key financial constraints facing the export-oriented frozen food sector, including long cash-conversion cycles, high inventory costs, expensive cold-chain operations and limited access to low-cost financing, according to a Bangladesh Bank circular issued today.

The three-year fund will be operated on a revolving basis.

All scheduled banks operating in Bangladesh will be eligible to participate, subject to signing a participation agreement with Bangladesh Bank’s Agricultural Credit Department-2.

The central bank said the facility would support the production, collection, processing and export of frozen shrimp, fish and other frozen food products. Financing can also be used for purchasing raw materials, expanding or modernising factories, buying machinery and setting up cold-storage facilities.

It will also cover the reopening of closed or partially operational fish and food-processing factories, solar power projects and environmental remediation expenses such as soil reclamation.

For new factory projects, banks can provide term loans for up to seven years, including a maximum one-year grace period. For renovation, expansion and modernisation of existing facilities, the maximum loan tenure will be five years, also including a one-year grace period.

Working-capital loans can be provided for one year and may be renewed once, although a borrower can receive the facility for a maximum of two years under the fund.

Bangladesh Bank has set financing ceilings for frozen-food businesses under a new support scheme, with new factories eligible for term loans of up to Tk 30 crore.

Existing frozen-food processors can receive up to Tk 20 crore for renovation, expansion and modernisation.

Businesses can also obtain up to Tk 5 crore, or 30 percent of the main project loan, whichever is lower, for installing solar panels.

Working-capital loans for raw materials, production, wages and utility bills will be determined based on annual turnover, subject to a maximum of Tk 20 crore.

Banks have been instructed to prioritise frozen-food exporters whose factories are fully or partly closed due to working-capital shortages.

However, firms already receiving financing under other Bangladesh Bank or government schemes for the same purpose will not qualify. Classified loan defaulters will also be excluded.

Bangladesh Bank will provide pre-financing to participating banks, but lenders will bear the full credit risk and remain responsible for loan recovery. Banks failing to repay the pre-financed amount on time will face an additional 2 percent interest for the delayed period.

Banks must monitor loan utilisation and inspect borrowers’ factories or offices every quarter.

Beneficiaries must also take steps to meet at least 15 percent of their electricity needs from solar power within two years. Non-compliance may result in the suspension of further financing.

The scheme aims to diversify exports, boost foreign exchange earnings, create jobs and expand rural economic activity.