Reviving Industrial Heartbeat: A Tk 20,000 Crore Financing Scheme For Closed/Partial Closed Factories.
Distressed factories to productive enterprises by bank-led strategy for industrial recovery, employment generation and sustainable economic growth.
Reviving Industrial Heartbeat: A Tk 20,000 Crore Financing Scheme For Closed/Partial Closed Factories.
Distressed factories to productive enterprises by bank-led strategy for industrial recovery, employment generation and sustainable economic growth.
Bangladesh Bank’s proposed Tk 20,000 crore financing scheme for closed and partially closed factories presents an important opportunity to revive industrial capacity, protect employment, restore investor confidence and stimulate economic activity. However, the success will depend not on how much money is disbursed, but on how many viable factories return to sustainable production and repay their financing.
How will the scheme stimulate the economy?
Restarting the operations of viable factories can generate multiple economic benefits. Restarting production will create jobs, restore workers’ incomes, support SMEs and local suppliers, increase domestic value addition, and expand exports. Higher production and sales can also improve banks’ recovery prospects and generate additional tax and VAT revenue.
However, the scheme should therefore distinguish between temporary financial distress and fundamental business failure. Factories with viable products, markets and management may deserve rehabilitation. Still, enterprises with obsolete technology, no credible market or persistent governance failures should not receive financing merely to preserve their existence.
The appropriate strategy for commercial banks
Commercial banks should act as industrial rehabilitation partners, not merely loan disbursers. Each application should be supported by a professionally prepared revival plan covering:
– Viability assessment: Verify the causes of closure, installed capacity, machinery condition, energy availability, market demand, management capability, and outstanding liabilities.
– Market-led financing: Prioritise factories with confirmed export orders, purchase contracts or demonstrable domestic demand.
– Ring-fenced disbursement: Pay wages directly to workers, suppliers against invoices, and utility providers directly. Route sales proceeds through a designated escrow or collection account.
– Independent credit decisions: Should have separate business rehabilitation assessment from pressure to disburse funds. Apply enhanced due diligence and conflict-of-interest controls.
– Expert support: Banks should engage engineers, industry specialists, financial analysts and turnaround professionals where necessary.
Banks must follow Bangladesh Bank’s applicable eligibility criteria and circulars. In particular, financing must not become a mechanism to conceal old bad loans or shift losses to a subsidised facility.
Which financial model should be used?
A Viability-Based Turnaround Financing Model (VBTFM) integrating cash-flow lending, scenario analysis and risk-adjusted credit assessment, is recommended.
Five-stage financial model:
Restart funding requirement:
Calculate the minimum working capital needed for restart, raw materials, wages and utilities, net of the borrower’s contribution and supplier credit.
Integrated financial projections:
Prepare monthly cash-flow, income-statement, and balance-sheet projections for 12 months, with downside and stress scenarios.
Debt-service capacity:
Test whether forecast operating cash flows can repay principal and interest. Use a debt-service coverage ratio (DSCR) of at least 1.20x as a recommended internal screening benchmark, subject to sector and scheme rules.
Risk-adjusted credit assessment:
Estimate probability of default (PD), loss given default (LGD), and exposure at default (EAD), with appropriate expected credit loss (ECL) provisioning and risk-adjusted return analysis.
Controlled revolving facility:
Release financing in stages against verified milestones, with repayment primarily from actual sales proceeds rather than refinancing or asset sales.
The model should establish three cases, such as base, downside, and severe stress. A factory should not qualify simply because it owns valuable land or machinery; it must demonstrate a credible route to operating cash generation.
Monitoring and end-use verification
Monitoring should combine digital transaction surveillance with physical verification and independent performance reviews as under:
Frequency Required control
Before approval Factory inspection, independent capacity assessment, ownership and CIB checks, revival plan and verified funding gap
At each disbursement Invoice verification, supplier validation and direct payment controls
Weekly Sales, collections, production, inventory and wage-payment reports
Monthly Cash-flow forecast versus actual, capacity utilisation, employment and repayment performance
Quarterly Physical factory inspection, stock verification, financial review and compliance reporting
On exception Suspend undisbursed funds, investigate diversion and initiate recovery or other action under applicable rules
A central monitoring dashboard should track disbursement, production restored, jobs retained and created, capacity utilisation, export receipts, overdue amounts, fund diversion and repayment performance. Bangladesh Bank should conduct risk-based inspections and publish periodic aggregate performance reports.
Implementation priorities:
The immediate priority is to overcome the gap between fund availability and actual productive deployment, but implementation has slowed down. If the distressed factories fail to get required funding immediately, then orders may be cancelled or revival may not be possible. As reported on 19 October 2026, approximately Tk 560 crore had been disbursed from the Tk 20,000 crore scheme, with a further Tk 929 crore under processing. This indicates the need to resolve genuine documentation and viability-assessment bottlenecks without weakening credit discipline.
The government and Bangladesh Bank should establish a joint implementation task force, introduce standardised turnaround assessment templates, set service-level timelines for applications, and maintain a pipeline of independently assessed viable factories. Where existing debt distress prevents otherwise viable enterprises from qualifying, any restructuring or eligibility solution must be explicitly authorised under applicable regulations—not achieved by misusing the revival fund.
Finally, the success of the Tk 20,000 crore scheme should be measured by sustainable factories, productive jobs, increased output and actual loan recovery—not by disbursement volume alone. A disciplined combination of viability-based lending, ring-fenced cash flows, expert supervision, and transparent accountability can turn this financing initiative into a genuine engine of Bangladesh’s economic recovery.
