The central bank yesterday issued a guideline for Sharia-based banks and other financial institutions to provide low-interest loans to agro-processors, small enterprises and renewable energy and for environment-friendly initiatives.

Linder the scheme, small entrepreneurs will be given a maximum ofTk 50 lakh loan against which the banks will get 100 percent refinance facility. The tenure of the loans will be between three and five years.

While no specific rate of interest has been mentioned, banks have been directed to keep it at the minimum.

The move comes to channel the surfeit liquidity that Islamic banks sit

on at all times owing to their restricting lending principles to economic activities.

Subsequently, the central bank last month formed a refinance scheme with the Sharia-based banks' excess liquidity.

Under the scheme, the Sharia lenders can make a three-month renewable investment in the fund, to be worth Tk 2,000 crore. The return on investment will be the lower of the two: the Mudaraba savings account rate of the lenders or 5 percent.

The profits from the fund will be distributed among participating lenders based on their investment ratio. The central bank will not take any profit even if it manages the fund.

Sharia-based lenders will have to

repay the central bank the principal amount of the loan and the profits on it every three months. The lenders, however, will be able to borrow until their investment period lasts.

Those who took training at SME Foundation, Directorate of Youth Development Directorate of Women Affairs and BSCIC will be identified as new entrepreneurs in cottage, micro and small enterprises category, according to yesterday 's notice.

The borrowers will be between 18 and 45 years of age and a maximum of Tk 10 lakh loan can be obtained col-lateral-free and Tk 25 lakh with collateral.

The default loan ratio of the participating Islamic banks will be no more than 10 percent.