BB launches 2,000cr taka refinance scheme for leather sector

Bangladesh Bank (BB) has launched a 2,000 crore taka refinance scheme to support the expansion and modernisation of the country's leather and leather goods industry, aiming to boost exports, strengthen environmental compliance and improve global competitiveness.

In a circular issued on Thursday, the central bank said the fund has been created from its own resources to help transform the leather sector into a sustainable and environmentally compliant industry.

The scheme will finance the construction and expansion of factories, procurement of machinery, and installation of environmental infrastructure, including Effluent Treatment Plants (ETPs), Sewage Treatment Plants (STPs), dumping yards and solid waste management systems.

It will also cover the cost of obtaining Leather Working Group (LWG) certification, modernising existing tanneries, and manufacturing chemicals, accessories and other auxiliary products for the leather industry.

Under the scheme, borrowers will receive loans at a maximum interest rate of 7%, while participating banks will receive refinance from Bangladesh Bank at 4%.

The revolving fund will remain in operation for three years.

Loans for establishing new factories will be available for up to seven years, including a two-year grace period. Financing for modernisation projects will carry a repayment period of up to four years, including a six-month grace period, while working capital loans will be available for one year and renewable for up to three years.

All scheduled banks will be eligible to participate in the scheme by signing agreements with Bangladesh Bank's SME and Special Programmes Department.

The central bank has capped financing at 30 crore taka for new leather processing facilities, 20 crore taka for leather goods manufacturing infrastructure, 10 crore taka for modernising existing facilities, and 5 crore taka for working capital for manufacturers of auxiliary products.

To encourage 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.

Borrowers will also be required to implement measures to eliminate occupational health risks for workers.

Companies classified as loan 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.