The Bangladesh Bank has revised down the lending rate for borrowers who have business with Japanese firms under the Foreign Direct Investment Promotion Project (FDIPP) funded by the Japan International Cooperation Agency (Jica).
From now, such borrowers will get loans at a maximum of 5% interest, down from the existing highest rate of 7%, according to a circular issued by the central bank on Sunday.
In this case, the Bangladesh Bank will lend to participating financial institutions at 1.5% interest, while lenders will take a maximum of 3.5% margin from end borrowers.
The central bank has also relaxed the criteria for Bangladeshi companies to be entitled to the loans.
Bangladeshi companies which have over $100,000 worth of deals with Japanese firms will be eligible for applying for the loan. Previously, the amount was $1 million.
Earlier in August 2017, the Bangladesh government and Jica signed an agreement to provide funds to the central bank to accelerate the economic development of the country by promoting private sector investment and foreign direct investment from Japan.
The fund size is 7.03 billion Japanese Yen – equivalent to $68 million.
The funds will be provided with refinance or pre-finance for Japanese-invested enterprises and Bangladeshi enterprises in business relationships with Japanese enterprises supporting their operations – mainly in the manufacturing sector.