From now on, the export-oriented manufacturers of knitwear products would be able to borrow $20 million from Export Development Fund (EDF) against their foreign currency financing to manufacturer-exporters for input procurement Bangladesh Bank increased the limit to give a cushion to them.
Earlier, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) member factory could borrow a maximum of $15 million from EDF against their foreign currency financing to manufacturer-exporters for input procurement.
In a circular issued on February 25, the central bank stated the loan ceiling for the knitwear factories has been raised from $15 million to $20 million, which will be effective immediately.
It has now been decided to enhance the limit of $15 million to $20 million for member mills of BKMEA. Other instructions contained in the said circular shall remain unchanged, said the circular.
“Increasing the amount of EDF for the knitwear sector was a longstanding demand and we welcome the decision as it would the manufacturers to get better support during fund constraint.”
“Increasing the amount of EDF for the knitwear sector was a longstanding demand and we welcome the decision as it would the manufacturers to get better support during fund constraint,” BKMEA First Vice President Mohammad Hatem told Textile Today.
Due to the fund crunch, a good number of exporters are facing difficulties and increasing the limit will help to expand the business, said Hatem.
In the first seven months of the current fiscal year, export earnings from knitwear goods have seen a 5.13% fall to $9.62 billion, which was $10.14 billion in the same period a year ago.
Bangladesh Bank has increased the size of the Export Development Fund (EDF) by 16.7% to $3.5 billion from $3 billion to cater to more exporters.
EDF was introduced by the central bank in 1988 with a capacity of $30 million, which is gradually increased over time.
Currently, the EDF interest rate is fixed at 2.5%, plus Libor (London Interbank Offered Rate). Businesses from various sectors, including garments, can take loans up to $25 million for a maximum of 180 days.
Under the existing provision, the EDF financing is allowed for input procurements against back-to-back import letters of credit or inland back-to-back LCs in foreign exchange by manufacturers producing final output for direct export.
The EDF loans from the central bank are payable by the banks upon receipt of export proceeds within 180 days from the date of disbursement.