The recently signed agreement between the central bank and 16 commercial banks of the country to extend low-interest loans in a bid to energise the limping jute sector appears timely. To be funded from a refinance scheme of Tk 2 billion by the Bangladesh Bank for a period of five years, the loan arrangement may prove beneficial provided disbursement and utilisation are properly monitored. The scheme also aims at providing a reprieve for the banks to recover their unrealised loans.
The jute sector is in a shambles. Default bank loans, mounting stockpiles and export slump have caused serious difficulties for the entire industry to devise a way out. According to reports, total loans given to the jute sector by the 16 banks stand at Tk 15.05 billion, a good portion of which is non-performing. Stockpiles have hit a nine-year high. Downturn in exports by nearly 20 per cent in the last fiscal owing to declining overseas demand from major markets has left things more uncertain than in the recent past. Depressed international market and domestic demands have forced 20 mills to shut down in the last one year, and those that are in operation have drastically reduced production. Mills under the BJMA (Bangladesh Jute Mills Association) and the BJMC (Bangladesh Jute Mills Corporation) have been incurring heavy losses. Many of the mills are also facing serious problems in procuring raw jute due to acute fund constraints.
Against this backdrop, it remains to be seen how far the difficulties facing the jute sector can be lessened by the central bank's refinance scheme. Under the scheme, state-owned and private jute mills can take 40 per cent each of their required funds as loans, while exporters and traders are eligible to get the remaining 20 per cent. The banks will get the loans from the central bank at the rate of 5.0 per cent interest, which in turn will disburse at 9.0 per cent interest. The main objective of the refinance scheme is to help millers and traders purchase raw jute and in the process facilitate the growers in obtaining fair price.
Understandably, protecting the interest of the jute growers is not just a matter of importance for their own sake but is also one crucially linked to the very survival of the entire jute industry. More often than not, it is the growers - the perennial victims of unfair prices - who unable to seek any remedy on their own to dispose of their harvest in the pick season are forced to sell their produce at prices less than the cost of growing. In the wake of declining international demand last year, farmers had to pay a heavy price. It is feared if the situation persists for a few consecutive years, jute may indeed face a bleaker future. Rough estimates say more than four million farmers are directly or indirectly dependent on growing jute. It is expected that the mandatory packaging requirement of rice by jute sacks might boost domestic demand. All concerned should act together to ensure quick disbursement to be followed up by close monitoring.
Lifeline for the jute sector
FE Team | Published: September 13, 2014 00:00:00 | Updated: November 30, 2026 06:01:00
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