The government has incurred a financial loss of Tk 2.755 billion for financing flaws in 19 projects under the equity and entrepreneurship fund (EEF) between fiscal years 2009-10 and 2014-15, a special audit finds.
Officials say the comptroller and auditor-general office found the loss having been caused through approval of loans without "due diligence" and absence of proper monitoring.
Named equity and entrepreneurship fund at its launch in 2000-2001, it was renamed entrepreneurship support fund (ESF) in 2018, and the equity model was changed to low-cost loan model to make the entrepreneurs accountable to ensure recovery of money in the case of project failure.
The Parliamentary Standing Committee on Public Accounts has summoned the top officials of the ministries, departments, and organisations concerned, which sanctioned the loans and were in supervisory role, to appear at a committee meeting next week to explain the audit objections.
The comptroller and auditor general (CAG) and some of his subordinates, secretary to the Financial Institutions Division, a representative of finance division, the governor of Bangladesh Bank, the director-general of commercial audit directorate, managing directors of the Investment Corporation of Bangladesh (ICB), MIDAS Financing Ltd, and NCC Bank Ltd have been asked to attend the meeting and submit relevant evidences.
The EEF was launched for extending support to two promising sectors -- agro-based food processing and software -- the fund had been managed by Bangladesh until May 2009.
Thereafter, the operational function of the fund was transferred to the ICB while the central bank remained involved with formulating fund-management policies and monitoring the investment activities of EEF.
The special audit found that the EEF fund incurred a loss of Tk 917 million as an entrepreneur did not withdraw rest of the loan amount two years after the disbursement of first instalment. Also, the entrepreneur finally did not implement the project and did not spend his or her fund properly.
In another project the auditors found the entrepreneur having ceased from buying back the entire volume of government share, and having not converted the disbursed funds to loan. Thus, the recovery of interest-free government money became uncertain, causing a Tk 831-million loss.
"The auditors also detected that a project had not been in commercial operation for long and the entrepreneur did not buy back government share even after the expiry of tenure, thus causing a financial loss of Tk 686 million," says one official.
In another incident it was found that an entrepreneur had taken money from the EEF by submitting forged land documents and did not invest the funds and "misappropriated" Tk 10.6 million.
Also, the fund officials disbursed money to a project bypassing the decision of the technical advisory committee and later the project could not go for commercial operation, causing a loss of Tk 21.624 million.
During the 2001-09 period, under the management of the central bank, the EEF had disbursed some Tk 5.60 billion to 242 projects. On the other hand, the EEF under the management of the ICB from 2009 to 2021 disbursed Tk 10.58 billion to 794 projects.
Now the entrepreneurs invest 51 per cent of total project cost as equity while the ESF provides 49-per cent cost as loan. The ESF loans are only being disbursed in instalments after the equity of the entrepreneur is invested.
The ESF charges 2.0-per cent interest on the loans, the ESF policy mentions.
