Japan has agreed to provide a JPY10.4bn ($111m) loan for the first phase of construction of the $2.7bn Dhaka Metro rail system in Bangladesh.

The loan is part of a JPY70.693bn ($757m) loan agreement signed between the Japan International Cooperation Agency (JICA) and the Government of Bangladesh to assist three projects in Dhaka.

The funds will be used for the construction of the 20.1km mass rapid transit (MRT) project from Uttara to Motijheel, which is scheduled to start in 2016 and will be completed in 2021.

Construction of the 16-station metro will be carried out in three phases by Dhaka Mass Transit, with most of the network laid out over ground.

Of the total route, the first 11km is scheduled to be completed by 2019, with another 4.4km due by 2020; the remaining 4.7km is set to be finished by 2021.

"Construction of the 16-station metro will be carried out in three phases by Dhaka Mass Transit, with most of the network laid out over ground."

Following completion, the electric metro railway is expected to carry around four million commuters every day, easing road traffic congestion in the Bangladeshi capital.

JICA Bangladesh chief Takao Toda said the Japanese agency will finance 85% of the project cost at an interest rate of 0.01%.

"The metro-rail will reduce travel time to 36 minutes [to cross from north to south Dhaka], which now takes hours," Toda said.

Japan agreed in December 2012 to provide a $2.1bn loan for the construction of the Dhaka metro, while the remaining cost will be funded by the Government of Bangladesh.

The metro route will have stops at Pallabi, Chandrima Udyan, Bijoy Sarani, Shahbagh, TSC, Bangla Academy, Curzon Hall, Topkhana and Bangladesh Bank, with additional routes planned to be added in the future.