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BKMEA seeks extended EDF loan facility

Members allege they are deprived of the benefit

MONIRA MUNNI | January 14, 2020 00:00:00

Members of the country's knitwear subsector have alleged that they were being deprived of the enhanced loan facility under the Export Development Fund (EDF).

They also termed it as a hindrance to further investment in the subsector.

They pointed out that they were not getting the enhanced loan as the central bank circular in this regard did not include Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).

Bangladesh Bank (BB) increased the EDF loan limit twice since 2017 to US$ 25 million from $ 15 million for the member mills of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and Bangladesh Textile Mills Association (BTMA), they added.

Amid demands from its members, the BKMEA in a letter dated January 05 requested the central bank to include its name through issuing a revised circular.

When asked, BKMEA vice president Mohammad Hatem said: "It should not be right to deprive our member factories of the facility considering their contribution to the economy."

The knitwear sector contributes more than 41 per cent of the country's total export earnings, he said.

Bangladesh fetched $ 34.13 billion from readymade garment exports, including $ 16.88 billion from knitwear items, in the last fiscal year, according to Export Promotion Bureau data.

Some 1,700 knit units are registered with the BKMEA while around 1,100 are in operation.

A good number of our member factories informed that the existing US$ 15 million is not enough for them, Mr. Hatem said, adding that it is hindering the maximum use of their investment capability.

A member factory in a letter to BKMEA said that its annual export is about $ 80 million and the existing $ 15 million EDF loan threshold is not sufficient enough against the company's back-to-back LCs (letter of credits), said one of its officials.

Established in 1989, the EDF is intended to facilitate access to financing in foreign currency for procurement of inputs by the manufacturer-exporters.

The authorized dealer (AD) banks can borrow US Dollar funds from the EDF against their foreign currency loans to manufacturer-exporters for input procurement.

The present size of the fund is $ 3.5 billion. Businesses from various sectors, including garments, can take loans up to $ 25 million for a maximum of 180 days.

The timeframe is extendable by the central bank up to 270 days in case of a longer period taken for repatriation of the export proceeds.


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