Bangladesh Bank is preparing to launch its special ‘Udyog’ financing scheme this month, offering collateral-free loans to young entrepreneurs and creating a new route to formal bank financing for people who may struggle to meet conventional lending requirements.
The scheme is expected to begin on a pilot basis across all upazilas in eight districts, with one district selected from each of Bangladesh’s eight divisions. If the initial implementation proceeds as planned, the programme will be expanded nationwide from January next year.
The initiative is aimed at providing relatively low-cost financing to a new generation of entrepreneurs. Bangladesh Bank has set the maximum age for applicants at 28, with the scheme designed to support young people seeking to establish or develop businesses without having to provide conventional collateral.
A central bank official, speaking on condition of anonymity, said the initial phase would begin later in August and would operate with a three-year loan tenure. Bangladesh Bank has described this first stage as the activation phase, which will allow the authorities to assess how the financing model works before considering nationwide implementation.
The total size of the financing package is Tk 10 billion. Half of the amount, or Tk 5 billion, will be provided as loans, while an equivalent amount will be available as grants under the scheme.
Bangladesh Bank does not plan to establish a separate special fund for the lending component. Instead, the loan portion will be financed through existing refinancing schemes. The grant component is expected to come from unused corporate social responsibility funds held by banks, together with funds provided by Bangladesh Bank itself.
The structure is intended to reduce the barriers faced by young entrepreneurs who have viable business ideas but lack sufficient assets to pledge as security. At the same time, the arrangement includes a mechanism intended to encourage borrowers to repay their loans within the stipulated period.
Each eligible entrepreneur can receive a loan of up to Tk 1 million, or Tk 10 lakh, along with an equivalent grant allocation. The grant, however, does not simply become an additional cash payment to the borrower. Its treatment is linked to the repayment performance of the loan.
According to the central bank’s explanation, if an entrepreneur receives a Tk 1 million loan and repays it within the agreed period, there is no additional liability associated with the corresponding grant. If the borrower defaults, however, an amount equivalent to the defaulted portion of the loan will be added to the borrower’s liability under the grant arrangement.
This means that a borrower who fails to meet repayment obligations could ultimately become responsible for both the outstanding loan and the corresponding grant amount. The authorities have also warned that borrowers who default could face legal action.
The selection process is expected to involve several stages. Entrepreneurs aged 28 or below will first submit applications. Commercial banks will then conduct the necessary checks and independently prepare a shortlist of eligible candidates.
Those shortlisted will be invited to a day-long session in the relevant upazila. During the session, applicants will present their business structures and plans before a special committee. The committee will then assess the proposals before deciding which applicants should receive financing.
The committee is expected to include representatives from commercial banks, Bangladesh Bank and established entrepreneurs. A central bank official said individuals classified as politically exposed persons will not be included on the committee, reflecting an effort to keep the selection process separate from political influence.
The scheme will have a defined local selection target. Ten entrepreneurs from each upazila will be selected for the special financing programme.
The introduction of collateral-free lending could be significant for young people entering formal entrepreneurship, particularly because access to conventional bank credit often depends on the ability to provide security. By placing greater emphasis on business plans and screening rather than traditional collateral alone, the scheme seeks to widen access to institutional finance.
The initiative has also been framed by Bangladesh Bank in the broader context of aspirations among Bangladesh’s younger generation following the July-August mass uprising of 2024. The authorities have linked the programme to the goal of creating wider and less discriminatory access to employment, finance and other economic opportunities.
Its initial implementation will therefore be closely watched. The pilot phase is expected to provide practical lessons on applicant screening, business viability, loan utilisation and repayment behaviour. Those experiences could shape the nationwide version of the scheme when Bangladesh Bank plans to extend ‘Udyog’ across the country from January next year.
