Dhaka: Bangladesh Bank (BB) has launched a significant revolving pre-finance scheme valued at Tk 2,000 crore to enhance the development, sustainability, and global competitiveness of the nation’s leather and leather goods industry. The central bank has issued a circular, signed by Director of its Banking Regulation and Policy Department (BRPD) Gazi Md Mahfuzul Islam, detailing the operational policy guidelines for all scheduled banks.
According to United News of Bangladesh, the primary aim of this fund, financed entirely from BB’s own resources, is to meet domestic demand, expand export earnings, promote environmentally friendly production, ensure adherence to international quality standards, and generate employment within the leather sector. The scheme, structured as a revolving fund for three years, will be managed and monitored by the SME and Special Programme Department at the central bank’s head office.
All scheduled banks in Bangladesh can partake in this scheme after signing a Participation Agreement with the SME and Special Programmes Department. Interested banks are required to apply to the central bank within 15 working days of approving loans for clients. For customers, the maximum interest rate on loans under this scheme is capped at 7 percent annually, while participating banks will receive pre-finance facilities from Bangladesh Bank at a 4 percent interest rate. The banks are prohibited from charging fees beyond the central bank’s prescribed schedule.
The scheme offers project term loans up to Tk 30 crore for setting up new tanneries, installing effluent treatment plants (ETP), and constructing cold storage for raw hide processing, with a tenure of up to seven years, including a maximum grace period of two years. Existing tanneries, leather product factories, or new leather product units can avail term loans ranging from Tk 10 crore to Tk 20 crore. Furthermore, working capital loans up to Tk 30 crore are available for operational expenses, and ancillary component manufacturers in the leather industry can receive up to Tk 5 crore.
The circular outlines eligibility and environmental obligations, giving priority to raw hide processors and raw leather processing institutions. However, entities currently enjoying loan facilities under other government or central bank funds like the Export Development Fund (EDF), Export Facilitation Pre-finance Fund (EFPF), or Green Transformation Fund (GTF) are ineligible for this scheme for the same sector. Additionally, identified loan defaulters under the Bank Company Act, 1991 are excluded.
To meet environmental and compliance targets, the central bank has imposed special conditions on leather processing entities receiving funds. They must present proof of Leather Working Group (LWG) certification within two years and ensure that at least 10 percent of their electricity demand is met through solar power. Factories must also implement health and safety risk mitigation for workers. Failure to comply with these conditions will disqualify entities from receiving future loan facilities under this or any other Bangladesh Bank scheme.