In a move to encourage foreign investment and support business expansion, Bangladesh decided to let foreign firms borrow more from local sources.
A government committee, chaired by Bangladesh Bank Governor Ahsan H Mansur, suggested the central bank to let foreign firms borrow up to 60% of their project cost from local sources, which is at 50% currently, Bangladesh Bank Executive Director and Spokesperson Arief Hossain Khan told Times.
Since the Bangladesh Bank Governor chaired the recommending committee, Khan expects the central bank to come up with the official circular soon.
There is no such restriction for local firms in Bangladesh. However, banks usually provide 70%-80% of the project cost, requiring the remaining amount from firms’ own capital.
Ashik Chowdhury, Executive Chairman of the Bangladesh Investment Development Authority (BIDA), at the Scrutiny Committee on Foreign Loan or Supplier’s Credit in May, recommended aligning the loan terms for foreign firms with those of local businesses.
The expected relaxation would encourage foreign companies expand business in Bangladesh, invest more for balancing, modernization, rehabilitation, and expansion, said Arief Hossain Khan.
Foreign owned and multinational companies operating in Bangladesh have long been expressing their concerns over the unequal treatment the faced in accessing local bank loans.
Shekhar Ranjan Kar, Chief Head of Finance and Accounts at local steel giant BSRM, said there should be no policy discrimination between local and foreign firms if Bangladesh wants to attract foreign capital.
Foreign firms usually tend to borrow less and depend on own funds.
Under the existing 2018 Guidelines for Foreign Exchange Transactions, foreign-owned or controlled companies in the manufacturing and service sectors are allowed to borrow from local banks in taka for business expansion or BMRE, but only after three years of operations in the country.
