Govt cuts interest rate on garment remediation loan

The government has fixed new rate of interest and services charges under the donor-assisted refinancing fund to help garment factory owners secure the loan, sources said.
All charges have now been capped at 7.0 per cent, which were 9-10 per cent for getting loan from the apparel sector's remediation fund, according to a ministry of finance (MoF) guideline issued on Sunday last.
The new rate comes as the BB is yet to start disbursing money from the remediation fund on a full scale because of high interest rate and service charges levied by the government agencies, a source said.
Over Tk 3.18 billion (Japanese yen 4,129 million, U$38-40 million) fund for remediation of RMG factories has been idle after poor demand from the owners due to 'unfavourable' interest rate, industry insiders said.
So far, the country's apparel entrepreneurs avoided accessing to funds from 9-10 per cent interest rates from the facility that has a cheap foreign-aided component.
The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) repeatedly demanded bringing down the interest rate and service charges to 3.0-5.0 per cent.
Service charge and interest rate will not be more than 6.0 per cent for JICA fund.
Besides, service charge and interest rate for AFD (French Development Agency) fund will not cross more than 7.0 per cent.
The Bangladesh Bank (BB), Bank and Financial Institutions Division (BFID) and the commercial banks should charge 1.0 per cent, 0.90 per cent and 4.0 per cent respectively, according to the guideline.
The BB, the BFID and the commercial banks concerned should charge 0.75 per cent, 0.75 per cent and 3.50 per cent respectively for AFD fund, said the guideline.
Currently, a move is underway to receive the promised AFD funds worth €50 million, a high official of MoF, who is involved with the matter, said.
Contacted, Deputy Secretary of Finance Division, MoF Shish Haider Chowdhury said, "The government has reduced the service charge, interest rate and other charges to reach the remediation fund smoothly to its users."
"We did not obtain loan from the fund because of higher interest rate. We will be affected, if we take the loan from the fund at 9.0-10 per cent interest through banks," he added.
The garment factory owners are facing tough times in carrying out the remediation work at their respective units, he said.
"We did not see new guideline on service charges and interest of the foreign remediation fund. We expect that all charges of foreign remediation fund to remain at 5.0 per cent," president of the BGMEA Md Siddiqur Rahman told the FE on Monday.
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