Bangladesh Bank, the central bank of Bangladesh, has launched a Tk 2,000 crore (approximately ~$162 million) pre finance scheme aimed at accelerating the development and expansion of the country’s leather and leather goods industry with a strong focus on environmental compliance, export competitiveness and value addition.
The central bank said the initiative seeks to transform Bangladesh’s leather sector into a sustainable, environmentally responsible and globally competitive industry by supporting investment in modern manufacturing, pollution control infrastructure and internationally recognised certifications.
Under the scheme, Bangladesh Bank will provide a 3 year revolving fund from its own resources, with all scheduled commercial banks in the country eligible to participate after signing an agreement with the central bank.
Bangladesh Bank said the fund has been established to improve the collection, preservation and processing of raw hides while encouraging the production of internationally competitive leather and leather products. The programme also aims to increase foreign exchange earnings through exports, generate employment and promote the adoption of advanced manufacturing technologies.
The financing can be used for a wide range of activities, including the construction and expansion of tanneries and leather goods factories, installation of new machinery, development of cold storage facilities for hides, and modernisation of existing production facilities.
The scheme also covers investments in environmental infrastructure such as Effluent Treatment Plants (ETPs), Sewage Treatment Plants (STPs), solid waste management systems, dumping yards and clean technologies, as well as costs associated with obtaining Leather Working Group (LWG) certification, says the bank.
In addition, manufacturers producing leather processing chemicals, footwear components and other inputs for the leather industry will also be eligible for financing.
New tannery projects, industrial waste treatment facilities and hide preservation infrastructure can receive term loans of up to Tk 30 crore (~$2.4 million) per project, while new leather goods manufacturing facilities are eligible for loans of up to Tk 20 crore (~$1.6 million)
Existing tanneries and leather goods factories seeking renovation or modernisation can obtain up to Tk 10 crore (~$800,000), while working capital loans are available up to Tk 30 crore, depending on annual turnover. Manufacturers of auxiliary products for the leather industry may receive working capital financing of up to Tk 5 crore (~$400,000).
The scheme offers loans at a maximum customer interest rate of 7%, while participating banks will pay 4% interest to Bangladesh Bank on the pre-finance they receive.
Companies importing raw hides, crust leather or finished leather will be excluded from the programme to encourage the use of domestically sourced hides.
Bangladesh Bank has introduced several sustainability conditions for beneficiaries. Leather processing companies must obtain Leather Working Group (LWG) certification within two years of receiving financing. Beneficiaries will also be required to source at least 10% of their electricity consumption from solar energy within the same period.
For more details check out the official Bangladesh Bank Circular here.
