Bangladesh Bank (BB) has launched a Tk 2,000 crore pre-finance scheme aimed at supporting the development and expansion of the country's leather and leather goods industry. The initiative, funded by the central bank's own resources, seeks to boost exports, improve environmental compliance, and enhance the competitiveness of the sector. The scheme will finance the construction and expansion of factories, procurement of machinery, and installation of environmental facilities such as Effluent Treatment Plants (ETP), Sewage Treatment Plants (STP), dumping yards, and solid waste management systems. It will also support compliance costs for obtaining Leather Working Group (LWG) certification, modernization of existing tanneries, and the domestic production of chemicals, accessories, and other ancillary products for the leather industry.
Scheme Details and Conditions
Under the scheme, borrowers will receive loans at a maximum interest rate of 7%, while Bangladesh Bank will provide participating banks with refinance at 4%. The fund will remain in operation for three years on a revolving basis. Term loans for new factory construction will be available for up to seven years, including a two-year grace period, while modernization loans will have a tenure of up to four years, including a six-month grace period. Working capital loans will be provided for one year and may be renewed for up to three years.
Eligibility and Sustainability Requirements
All scheduled banks in Bangladesh can participate in the scheme by signing agreements with Bangladesh Bank's SME and Special Programs Department. Loan ceilings have been set at Tk 30 crore for new leather processing facilities, Tk 20 crore for new leather goods manufacturing infrastructure, Tk 10 crore for modernization of existing facilities, and Tk 5 crore for working capital for manufacturers of auxiliary products. To promote sustainable production, Bangladesh Bank has attached several conditions to the scheme. Leather processing units must obtain LWG certification within two years of receiving financing, while beneficiary institutions must ensure that at least 10% of their electricity demand is met through solar power within the same period. Companies will also be required to adopt measures to eliminate occupational health risks for workers. Borrowers classified as defaulters under the Bank Company Act, 1991 will not be eligible for financing. Businesses already receiving support from Bangladesh Bank's Export Development Fund (EDF) or Green Transformation Fund (GTF) for the same purpose will also be excluded from the scheme.
