Access to low cost fund

The Bangladesh Bank (BB) has raised the Export Development Fund (EDF) from $ 6 billion to $ 7 billion to meet the growing demand for this fund among the exporters, according to a report published in The Business Post on Tuesday. The approval for the increase was given at a meeting of its Board of Directors on Sunday, the report said, quoting BB’s Executive Director and spokesperson Md. Serajul Islam. The fund, created in 1988 with $ 30 million, was raised in different phases. In June 2021, the EDF was raised to $ 6 billion from $ 5.5 billion, while it was raised to $ 5.5 billion from $ 5 billion in March of the same year. In April 2020, it was increased to $ 5 billion from $ 3.5 billion.

This latest enhancement in the fund is obviously a welcome move by the central bank at a time when the country is making efforts to recover from the damage caused to the economy by the Covid-19 pandemic that has been persisting for almost two years. This is also encouraging because of the fact that similar other funds created by the central bank, such as the Equity and Entrepreneurship Fund (EEF), received a lukewarm response from the entrepreneurs and remained largely unutilized.

Keeping the interest rate of lending from EDF low, particularly after the pandemic hit the economy, was a positive move. On April 7, 2020, Bangladesh Bank lowered the interest rate to 2 per cent following a downturn in the economic activities caused by Covid-19. Before that the interest rate was a six-month London Interbank Offered Rate (LIBOR) plus 1.50 per cent.

However, there is demand for further raising the fund, as Mohammad Hatem, executive president Bangladesh Knitwear Manufacturers and Exporters Association, said $ 7 billion is not enough. If the government analyzes the price of raw materials, the size of the fund should have been doubled.

He said they have urged the government several times to increase the EDF size considering the high price of raw materials. Our exporters, particularly the apparel sector, have done well even during the pandemic after an initial setback. According to the Export Promotion Bureau, the export earnings from the apparel sector rose by 30.73 per cent to $ 27.49 billion in July-February of FY22. It was $ 21.03 billion at the same period of the previous year. BGMEA utilisation declaration data shows, export order also rose by 21 per cent.

There is also demand for raising the individual limit of lending from the EDF. Members of Bangladesh Garment Manufacturers and Exporters Association and Bangladesh Textile Mills Association can now take loans of up to $ 30 million from the fund. Mohammad Ali Khokon, president Bangladesh Textile Mills Association, urged the government to raise the limit from $ 30 million to $ 40 million. He said that the government is yet to take any decision about it, but the prices of raw materials are increasing day by day.

As a result, it has become challenging to continue business operations with the help of $ 30 million EDF loans. However, BB executive direct Serajul Islam rejected the chance of raising the limit of individual lending from EDF, saying the EDF size has been increased due to growing demand for loans from this facility. “We are not thinking of raising the individual limit at
the moment.”

The lending from EDF is meant for several export sectors, such as leather and leather products, ceramics and pharmaceuticals. But export is not all about our economy. There are numerous small, medium, and large industries in different sectors that meet the growing domestic demand for different products and save valuable foreign currency. They are also equally affected by the Covid-19 pandemic and often face cash crunch in running businesses. They also need access to such low-cost funds, if not EDF. BB should analyse why the EDF succeeded, while others didn’t, and take steps.