Bangladesh Bank Launches Tk 20 Billion Pre-Finance Scheme to Boost Leather Sector Exports

Dhaka, July 30, 2026 — Bangladesh Bank has launched a Tk 20 billion pre-finance scheme for the leather sector, offering low-interest loans to tanneries, leather product factories, and ancillary component manufacturers in a strategic move to boost the country's leather exports. 👞 The central bank's initiative, announced via a circular on July 30, 2026, provides financing at just 4 percent interest rate, significantly below market rates, to support the growth and modernization of Bangladesh's leather industry. 📊

💰 The new scheme targets multiple segments of the leather value chain, from raw hide processing to finished leather goods manufacturing. Bangladesh Bank has structured the fund with specific loan categories and environmental compliance requirements, reflecting the government's dual focus on economic growth and sustainable development. 🌱

🏦 Loan Categories and Terms

📋 The pre-finance scheme offers different loan categories tailored to various segments of the leather industry:

• 🏗️ New tanneries and ETP installation — project term loans up to Tk 30 crore with tenure up to 7 years (including maximum 2-year grace period), for setting up new tanneries, installing effluent treatment plants (ETP), and constructing cold storage for raw hide processing
• 🏭 Existing tanneries and new leather product units — term loans ranging from Tk 10 crore to Tk 20 crore for existing tanneries, existing leather product factories, or setting up new leather product units
• 💸 Working capital loans — up to Tk 30 crore for operational expenses including raw material purchases, salaries, and utility bills, available for up to 3 years through annual renewals
• ⚙️ Ancillary component manufacturers — working capital loans up to Tk 5 crore for suppliers of components to the leather industry

⚖️ Banks are strictly prohibited from charging any fees beyond the central bank's prescribed schedule of charges, ensuring the benefit reaches the actual borrowers without hidden costs. 🛡️

🌱 Environmental and Compliance Requirements

🌍 To ensure environmental and compliance targets, the central bank has imposed several special conditions that beneficiaries must meet:

• 🏅 Leather Working Group (LWG) certification — leather processing entities must obtain LWG certification within 2 years of receiving funds
• ☀️ Solar power requirement — beneficiary units must meet at least 10 percent of electricity demand from solar power sources within 2 years
• 👷 Health and safety compliance — factories must ensure health and safety risk mitigation for workers
• ❌ Non-compliance penalty — failure to fulfil special conditions will disqualify the entity from receiving future loan facilities under this or any other Bangladesh Bank scheme

📋 Eligibility Criteria

🔍 The circular prioritises raw hide processors and raw leather processing institutions. However, certain categories are excluded from the scheme:

• ❌ Institutions currently enjoying loan facilities under other government or central bank funds — including the Export Development Fund (EDF), Export Facilitation Pre-finance Fund (EFPF), or Green Transformation Fund (GTF) — for the same sector
• ❌ Identified loan defaulters under the Bank Company Act, 1991 are strictly excluded

📊 This exclusion policy ensures that the fund reaches new beneficiaries and does not duplicate support already provided through other government schemes. The central bank's approach reflects a targeted strategy to expand the leather sector's capacity rather than subsidising existing beneficiaries. 🎯

👞 Strategic Importance for Bangladesh Leather Exports

📈 Bangladesh's leather and leather goods sector is the country's second-largest export earner after readymade garments, with significant potential for growth. The sector has been facing challenges including:

• 🏭 Aging infrastructure — many tanneries need modernization
• 🌍 Environmental compliance — international buyers increasingly demand sustainable production
• 💰 Access to affordable financing — high interest rates have constrained growth
• 🔧 Technology gaps — need for advanced processing equipment

🌐 The Tk 20 billion pre-finance scheme directly addresses these challenges by providing affordable capital with built-in compliance requirements. The LWG certification mandate, in particular, will help Bangladeshi leather exporters meet international environmental standards and access premium markets in the EU and US. 🇪🇺🇺🇸

🏭 Savar Tannery Industrial Estate Context

📍 The scheme is particularly relevant for businesses in the Savar Tannery Industrial Estate, which was developed to relocate tanneries from Hazaribagh. The estate houses over 100 tanneries and has faced ongoing challenges with:

• 💧 Effluent treatment plant (ETP) operations — central ETP capacity needs expansion
• ⚡ Reliable utility supply — gas and electricity for processing
• 🌱 Environmental compliance — meeting international standards for chemical use and waste management

📊 The pre-finance fund can be used for ETP installation and upgrades, directly addressing one of the sector's most pressing infrastructure needs. This aligns with Bangladesh's commitment to sustainable industrial development and the government's broader goal of increasing leather export earnings. 🚀

🔮 Implementation Timeline and Next Steps

📝 Banks interested in offering loans under this scheme must obtain prior approval from Bangladesh Bank's Foreign Exchange Policy Department. The central bank has instructed banks to submit detailed information on their technical infrastructure and security framework before launching the service. 🏦

📈 For the leather sector, the scheme represents a significant opportunity to modernize operations, meet international compliance standards, and expand export capacity. With the 2-year timeline for LWG certification and solar power adoption, the industry has a clear roadmap for sustainable growth. The Tk 20 billion fund, combined with the 4% interest rate, makes this one of the most attractive financing schemes available to Bangladesh's leather industry. 💎