The Japanese export credit agency, the Japan Bank for International Co-operation (JBIC), has kick-started a programme that will help smaller banks finance power projects overseas.

Through the scheme, JBIC will place loans (the volume or value of which are unspecified) in a trust account established with megabank SMBC. These will be accessed by smaller Japanese banks, who will then on-lend to power projects in Asia.

The first three participant banks are Chiba Bank, Gunma Bank and Iyo Bank and the involvement of JBIC implies that there will be a Japanese industrial element in the projects which are financed, either in the construction itself or the export of equipment.

The new scheme is viewed as an aid to commercial banks who are struggling under the negative interest rates introduced by the Bank of Japan in January 2016.

The -0.1% interest rate is seen as particularly punitive for smaller banks: while they can access cheap credit (essentially, they get paid for borrowing from the government), it virtually disqualifies them from charging higher lending rates.

Japanese companies, however, are notoriously frugal: borrowing has not grown as projected, and small banks are struggling.

The new facility will give these banks the security of a JBIC guarantee when they lend money overseas. While infrastructure projects are usually laden with tenors of 10 years or more, the banks will be able to on-lend the trust-held loans in shorter tenors and, therefore, make a quicker buck.

JBIC is among the most active of Asia’s export credit agencies, with a significant portion of its operations in the infrastructure, extractive and power sectors.

Its last action of 2016 was a US$40mn co-financing for a coal mine in North Kalimantan province, Indonesia. JBIC provided US$24mn of the capital, with the rest coming from Chiba Bank, Mie Bank and North Pacific Bank.

The borrower is Idemitsu Kosan, a Japanese energy company, which will use the finance to purchase shares in the Malinau coal mines. The thermal coal produced will be purchased by Japanese power companies. JBIC’s involvement is designed to ensure a stable supply of thermal coal for its industries.