Jica offers low-cost funds to businesses

Local as well as foreign entrepreneurs can get low-cost credit from the Japan International Cooperation Agency (Jica) in a scheme of the Bangladesh Bank designed to boost foreign direct investment in the country.

The central bank has already formed a fund worth about Tk 457 crore, which is equivalent to 7,033 million yen, for this purpose and invited all banks last week to participate in the programme.

Entrepreneurs can take loans for a maximum of 10 years from the fund at 7 to 10 percent interest, according to BB officials.

Only manufacturing firms are eligible for loans from the fund and they stand to get loans worth between Tk 1 crore and Tk 50 crore. 

If the factory is located in an economic zone, the nationality of the owner is irrelevant in getting the loan, meaning both Bangladeshi and Japanese investors can get credit from the fund, according to Jica guideline.

If any Bangladeshi or foreign entrepreneur sets up a joint venture with a Japanese firm outside of the economic zones they would be eligible for the loan as well.

Also, if any Japanese investor sets up factories outside of an economic zone they would qualify for the loan.

As per another eligibility criterion, Bangladeshi companies outside of the economic zones but with substantial amount of deals with Japanese firms will qualify for the credit.

However, the value of the deals with Japanese firms is expected to exceed $1 million within one year of applying for the loan. Bangladeshi firms having business contract with Japanese-invested companies in the country such as sub-contract, supply contract, service contract and so on are included in the category. The recommended industrial sectors are: electrical and electronics, light engineering, leather, food processing, pharmaceuticals and ICT.

In getting the credit, the entrepreneurs would furnish 30 percent of the total cost for setting up the proposed industrial unit. Credit can be taken for machinery, equipment, factory building, related civil works, and working capital.

The loan will be of three categories. The one-year short term loan will have to be paid back within one year of disbursement. The medium-term loan of not less than two years and up to five years is repayable in five years including a one-year grace period.

The long-term loan of more than five years and up to 10 years is repayable in 10 years with a grace period of two years. The repayment will be quarterly in equal instalments.

About the rate of interest on the loan, the guideline said the banks cannot charge more than the lending interest rate plus 5 percent. A central bank official said the rate of interest the borrower will pay would be fixed through discussions with the finance ministry within one week.

However, the official said it may be 7-10 percent. He said the banks will be selected following the Jica guideline.