Members of the Bangladesh Knitwear Manufacturers and Exporters Association will be eligible to take this foreign currency loan
Knit fashion manufacturers and exporters can now borrow up to $20 million from the Export Development Fund, the Bangladesh Bank's dedicated foreign currency fund that provides low-interest loan to the export-oriented sectors.
In a circular issued on Tuesday, the Bangladesh Bank said the loan ceiling for the knitwear factories has been raised from $15 million to $20 million, which will be effective immediately.
Members of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) will be eligible to avail this loan, said the circular.
Under the existing provision, the Export Development Fund financing is allowed for input procurements against back-to-back import letters of credit or inland back-to-back letters of credit in foreign currency by manufactures producing final output for direct export.
Bangladesh Bank Executive Director Md Serajul Islam told The Business Standard, "The fund was increased to boost exports amid slower growth of the readymade garment sector."
According to the Export Promotion Bureau, from July to January of the fiscal year 2019-20, readymade garment export faced 5.71 percent negative growth whereas knitwear sector recorded 5.13 percent negative growth.
Moreover, trade bodies have expressed fear that the coronavirus epidemic will hamper businesses more in the coming days.
BKMEA President Hatem Ali has expressed satisfaction over the central bank's decision in response to their request to increase the loan limit, which will benefit the knitwear sector.
"Some members of the BKMEA were facing problems for the previous loan limit. Now they can expand their business easily," Hatem said.
The Export Development Fund was introduced by the central bank in 1988 with a capacity of $30 million, which has been gradually increased to $3.5 billion now.
Currently, the Export Development Fund interest rate is set at the six-month London Interbank Offered Rate plus 1.5 percent.
Businesses from various sectors, including garments, can take loans from this fund for a maximum of 180 days.
Members of the Bangladesh Garment Manufacturers and Exporters Association and the Bangladesh Textile Mills Association can borrow up to $25 million from this fund.