Bangladesh Bank has cut the interest rate for loans from the special fund for development of garment factories from 7 to 5 percent.

Bangladesh Bank is implementing the project titled ‘Support for safety reform, remediation and environmental improvement in the garment sector made in Bangladesh’ with the support of development agencies and the government. The central bank issued a notification in this regard on Monday.

According to the notification, interest rate of loans under this scheme will be 5 percent, as opposed to 7 percent earlier. The 5 percent interest rate will be applicable on all new and old loans. For this, the banks will get funds from Bangladesh Bank at 2.5 percent interest, which was 3.5 percent earlier. Investment grants will be awarded on a first-come, first-served basis.

This project has been launched with the participation of development partners for the purpose of expanding garment industries, which is the main source of Bangladesh’s export income – in the sectors of ensuring firefighting, work environment improvement, workers safety, and above all environment friendly or security strengthening issues.

The 6.42 crore euro project has a 5 crore euro loan from development agency AFD, the rest of the money will come from grants from the European Union, KFW, GIZ, and funds from Bangladesh Bank.

So far 17 factories have received Tk 170 crore loans from this fund while distributed as grants of Tk 2.63 Crore.

Bangladesh Bank officials say that the loan interest rate has been reduced to boost the garment sector so that more factories come forward to develop their operations by taking loans from this fund.