Bangladesh Bank yesterday lowered the interest rate at which Japanese investors can avail funds from the foreign direct investment promotion project, aiming to draw more financing from the East Asian island country.

From now on, Japanese investors, be it individually or through joint ventures with locals, will be eligible for a 5 per cent interest rate instead of the previous 7 per cent, according to a central bank notice. In addition, local exporters whose annual shipments to Japan amount to $1 lakh and above will be allowed to get loans from the project, which is designed to provide financing to financial intermediaries.

The project is essentially a Tk 550 crore worth fund formed in 2017 by the government with assistance from Japan International Cooperation Agency (Jica) to give momentum to the inflow of FDI in the country.

Businesses have so far taken around Tk 140 crore from the fund in the form of refinance and pre-finance.

Under the refinance scheme, banks give out loans to businesses and the banking regulator reimburses the lender afterwards. In case of pre-finance, lenders first avail the fund from the central bank scheme before disbursing the associated loans to borrowers. Both term loan and working capital are now being provided to entrepreneurs. The loans come with a repayment tenure of five to 10 years. A grace period of a maximum of one to two years is allowed.

The tenure of the project is up to 2025, after which it will become a revolving fund. Revolving funds are formed for specific purposes with the proviso that repayments to the fund will be used again for those purposes.