Bangladesh Bank (BB) has formed a revolving pre-finance scheme worth Tk 20 billion (Tk 2,000 crore) to foster the development, sustainability and international competitiveness of the country’s leather and leather goods sector.
The central bank issued a circular, signed by Director of its Banking Regulation and Policy Department (BRPD) Gazi Md Mahfuzul Islam, on Thursday, outlining the operational policy guidelines for all scheduled banks.
The main objective of the fund – financed entirely from BB’s own resources – is to meet domestic demand, expand export earnings, promote eco-friendly production, ensure international quality standards, and generate employment opportunities in the leather industry.
Under the guidelines, the fund will operate as a revolving scheme for a tenure of three years, managed and monitored by the SME & Special Programme Department at the central bank’s head office.
All scheduled banks in Bangladesh are eligible to participate in the scheme upon signing a Participation Agreement with the SME & Special Programmes Department. Interested banks must apply to the central bank within 15 working days of approving loans for clients.
At the customer level, the maximum interest rate for loans disbursed under this scheme will be 7 percent per annum. Participating banks will receive pre-finance facilities from Bangladesh Bank at an interest rate of 4 percent. Banks are strictly prohibited from charging any fees beyond the central bank's prescribed schedule of charges.
For setting up new tanneries, installing effluent treatment plants (ETP), and constructing cold storage for raw hide processing, institutions can receive project term loans up to a maximum of Tk 30 crore with a tenure of up to seven years (including a maximum grace period of two years).
For existing tanneries, existing leather product factories, or setting up new leather product units, term loans ranging from Tk 10 crore to Tk 20 crore will be available.
Additionally, working capital loans up to Tk 30 crore can be disbursed to cover operational expenses such as raw material purchases, salaries, and utility bills for up to three years through annual renewals. Ancillary component manufacturers for the leather industry can receive working capital loans up to Tk 5 crore.
Eligibility & Environmental Obligations
The circular prioritises raw hide processors and raw leather processing institutions. However, institutions that currently enjoy loan facilities under other government or central bank funds such as the Export Development Fund (EDF), Export Facilitation Pre-finance Fund (EFPF), or Green Transformation Fund (GTF) will not be eligible to receive loans under this scheme for the same sector. Identified loan defaulters under the Bank Company Act, 1991 are also strictly excluded.
To ensure environmental and compliance targets, the central bank has imposed several special conditions.
Leather processing entities receiving funds must present proof of obtaining Leather Working Group (LWG) certification within two years.
Beneficiary units must meet at least 10 percent of their electricity demand from solar power sources within two years.
Factories must ensure health and safety risk mitigation for workers.
Failure to fulfil these special conditions will disqualify the entity from receiving future loan facilities under this or any other Bangladesh Bank scheme.