Bangladesh Bank Plans Tk 1,000cr Collateral-Free Loan Fund for 5,000 Young Entrepreneurs

Dhaka, August 12, 2026 — Bangladesh Bank is considering a landmark Tk 1,000 crore collateral-free financing package to support young entrepreneurs across the country, in what could become the largest youth-focused credit initiative in the nation’s banking history. The proposal, still under discussion, aims to provide affordable capital to approximately 5,000 young business owners who have ideas and ambition but lack the assets to secure conventional bank loans.

💰 Package Structure

The proposed scheme has two components:

• 💳 Loans: Tk 500 crore in collateral-free loans, with each eligible borrower receiving up to Tk 10 lakh
• 🎁 Grants: Tk 500 crore in grants linked to repayment performance, disbursed in stages rather than upfront
• 👥 Target beneficiaries: Approximately 5,000 young entrepreneurs
• 🏛️ Age limit: Under consideration to be set below 28 years
• 📅 Business age: May allow businesses operating for as little as one month to qualify

💬 ABB Chairman’s Vision

Mashrur Arefin, managing director and CEO of City Bank PLC and chairman of the Association of Bankers, Bangladesh (ABB), disclosed the details after a meeting with BB Governor Md. Mostaqur Rahman at the central bank headquarters. The meeting brought together BB officials and an ABB delegation to discuss ways to support young people who want to start or expand businesses.

“We want to support a large generation of young people who have business ideas and dreams but lack the capital to pursue them,” Arefin said. He emphasised that the facility aims to bridge the gap between startup financing and conventional bank loans, which are often difficult for young entrepreneurs to access due to stringent collateral requirements and credit history expectations.

🏘 Upazila-Level Implementation

The scheme would be implemented at the upazila level, with bank branch managers playing a crucial role in identifying potential beneficiaries. Banks would be assigned different upazilas and would help assess eligible applicants based on local business potential and entrepreneur credibility.

Authorities are also considering forming local committees to ensure the loans go to genuine entrepreneurs rather than people who secure them through political influence or lobbying. This governance mechanism is designed to prevent the misuse that has plagued previous government-backed credit programmes.

BB’s SME department and senior officials involved in SME financing are working on the draft framework. The central bank is expected to finalise the framework after further consultations with banks and other stakeholders.

🌏 Eligible Business Types

The scheme would not be limited to any particular type of business. Qualifying sectors include:

• 🌽 Agriculture & fisheries — aquaculture, poultry, dairy, crop processing
• 🔨 Manufacturing — light engineering, handicrafts, food production
• 🛒 Trading — retail, wholesale, e-commerce
• 💼 Services — IT, digital services, professional services
• 🎨 Creative industries — design, media, content creation

📊 Financing Structure

Under the proposed scheme, banks would provide loans by refinancing from Bangladesh Bank at a low interest rate. This structure reduces the cost of funds for commercial banks, enabling them to offer affordable interest rates to young borrowers. The refinancing facility from the central bank acts as a subsidy mechanism, bridging the gap between commercial lending rates and what young entrepreneurs can realistically afford.

The grants component may be linked to borrowers’ repayment performance, creating an incentive for timely repayment. Banks may also use part of their corporate social responsibility (CSR) funds to finance the grants, blending regulatory requirements with developmental objectives.

💬 Risk Tolerance and Economic Logic

Acknowledging the inherent risks of collateral-free lending, Arefin offered a pragmatic perspective: “Even if some loans become bad, financing 5,000 young people could create a new wave of entrepreneurship across the country if a significant number of them succeed.”

This approach represents a shift from the traditional risk-averse banking culture in Bangladesh, where collateral requirements have effectively excluded young entrepreneurs from formal credit markets. By accepting a higher tolerance for non-performing loans in exchange for broader economic impact, the scheme aligns with global best practices in youth entrepreneurship financing.

🌏 Strategic Context

The initiative comes at a time when Bangladesh is grappling with high youth unemployment, with approximately 2.1 million new entrants joining the labour force annually. The country’s demographic dividend — with a median age of 27.6 years — makes youth entrepreneurship a critical policy priority.

For the export sector, the scheme could eventually nurture a new generation of suppliers, manufacturers, and service providers who contribute to Bangladesh’s export diversification goals. Small businesses in agro-processing, light engineering, and IT services — sectors identified as key to post-LDC graduation economic resilience — could particularly benefit from the initiative.

✅ What Comes Next

The proposal is still in the discussion phase. BB officials are working on the draft framework, which will include detailed eligibility criteria, financing structure, interest rates, and monitoring mechanisms. The central bank is expected to finalise the framework after further consultations with banks, government agencies, and development partners. If approved, the scheme could be launched within the current fiscal year, providing a much-needed boost to Bangladesh’s entrepreneurial ecosystem.