Joint ventures on EPZs now qualified to receive export loans
The central bank yesterday allowed "Type-B" companies in export processing zones (EPZs) to enjoy foreign currency loans from an export production fund (EDF).
A good number of companies in the EPZs have already been facing a slowdown running a business over the past couple of months due to the coronavirus pandemic, which includes played a role in the "Type-B" companies being made qualified to receive the EDF loans, said a central bank official.
There are three types of companies in the EPZs, namely A, B and C.
Firms with 100 % foreign ownership are believed "Type-A". Jv companies with foreign and Bangladeshi ownerships happen to be treated "Type-B" and the ones with 100 per cent Bangladeshi ownerships "Type-C".
Several years ago the central bank allowed "Type-C" companies to enjoy loans from the EDF.
The eligible companies can use the fund to settle back-to-back letters of credit rating, which helps them efficiently procure industrial raw materials.
This will finally help them produce items for export promptly.
A company, which is a person in the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), will come to be permitted to avail no more than $25 million from the EDF.
Those which aren't members can avail $15 million each. Although loan had to be paid again within three months from the time of disbursement, the central lender recently increased the repayment tenure to half a year, given the business enterprise slowdown due to the pandemic.
The expanded repayment tenure will remain in place until June this season.
Bangladesh Lender earlier brought straight down the interest on the EDF to greatly help exporters recover from the financial impact of Covid-19 aswell.
Banks now receive the fund from the central lender at 0.75 % interest rate and will be allowed to charge borrowers a maximum 1.75 % in interest, it explained.
The prior rate was 2 per cent.
In April last year, the central bank also increased the EDF's volume to $5 billion from the previous $3.50 billion as a part of the government's ongoing efforts to improve exports.
"This will help the exporters, who happen to be facing a range of crisis as a result of pandemic," said Kutubuddin Ahmed, chairman and founder of Envoy Group, a good conglomerate concentrating on readymade garments and textile manufacturing.
However the central bank should cautiously screen the utilization of the fund in a way that eligible companies get the forex loans promptly, he said.
"If required, the central lender should increase the level of the fund further in the interest of the overall economy," he said.
The revolving fund was introduced at only $100 million in 2006. The central bank little by little increased the fund's quantity due to growing demand and swelling forex reserves, which is currently a lot more than $43 billion.
