They said the interest rate for the fund should not be more than 12 per cent while the maximum equity should be maximum 20 per cent and the procedures need to be simplified.

Their concern and suggestions came from a workshop on "Investment Promotion and Financing Facility (IPFF)" project at the Bangladesh Bank conference room.

"If the interest rate is not less than 12 per cent, investment won't be viable... 30 percent equity is very high for a power sector project," Bangladesh Energy Companies Association (BECA) President Moazzam Hossain told the workshop.

International Development Association (IDA) of the World Bank would provide an initial credit of US$50 million with an assurance to increase the fund size for the project under an agreement with Bangladesh signed on June 1, 2006.

The IPFF is expected to be formally launched by early next month.

The workshop was told that the Bangladesh Bank would administer the project through selected commercial banks and non-bank financial institutions (NBFIs) to promote government-endorsed infrastructure development by private sector entrepreneurs.

The government will contribute US$ 10 million to the facility while the central bank will provide the facility to the banks and NBFIs at an average interest rate on government bonds.

The banks and NBFIs will provide loans to the entrepreneurs, particularly of the power sector, at a rate to be negotiated on the basis of market situation.

The World Bank will provide the loan for 20 years with a grace period of 10 years and the tenure of the project will be of 5 years (2006-2011).

Under the project, the government has given special priority to power generation followed by port development, environmental, industrial and solid waste management projects, highways, expressways, and water supply.

To avail of the facility, the projects would require at least 30 percent equity from the private entrepreneurs while the participating financial institutions (PFIs) will finance 20 percent and the rest will be financed by the IPFF.

Bangladesh Bank executive director and IPFF project director Mohammed Abul Quasem, World Bank lead financial sector specialist for South Asia Region Juan Costin, procurement analyst Marghoob Bin Hussein and IIFC CEO Nazrul Islam made presentations on the project.

Power sector entrepreneurs of the country were present at the workshop.

Responding to entrepreneurs concerns, Juan said the procurement procedure and guidelines look more complicated than they actually are. "It's not impossible to implement... it's not that tough," he added.

He expected that the interest rate should not be beyond the average bond rate (8 percent) plus two or three percent as service charges and margin for the PFIs.

On the equity, Juan said the percentage was very much reasonable. "I've confidence that nobody (in Bangladesh) has access to such long-term funding at a fixed rate in Taka."

Even then, he said, they are ready to hear from the PFIs whether the equity participation could be reduced.

Replying to a question, he said they had talks with the Bangladesh Bank on the limitations of single-borrower exposure. "The Bangladesh Bank has committed to exempt from the limit for a loan guaranteed by a multilateral agency."