The existing crisis in the country’s leather industry is going to take a deeper dive during this year’s Eid-ul-Azha due to Covid-19 fallout.
Traders say they do not have money to buy leather or rawhide this year as they did not do a good business in the previous year as well. Many industries as a result could not repay loans till now.
Traders therefore have written letters to Bangladesh Bank (BB) demanding the formation of new fund at low-interest rate so that they can purchase rawhide and survive the pandemic.
It has been confirmed that BB on Wednesday (July 15) forwarded the traders’ proposal letter to finance division under finance ministry.
In the letter, Leathergoods And Footwear Manufacturers & Exporters Association of Bangladesh (LFMEAB), said a fund of around Tk 4,500 crore is already in place for the purchase of rawhide during Eid-ul-Azha. It is a revolving fund, meaning the condition of the fund is that the amount repaid by the traders at the specified time would be repaid as a loan for next year.
However, after moving leather factories from Hazaribagh to Saver the industry has been facing many difficulties. On top of that, due to the ongoing coronavirus epidemic, most entrepreneurs in the industry have not been able to repay last year's full loan, the letter mentioned.
The letter further said that the pandemic has disrupted trade and commerce not only in Bangladesh but across the world. The current cash crunch for entrepreneurs is beyond anyone's control and this has disabled traders to make payments on time.
The government's timely support can play a big role in this regard. Therefore, the letter requested for the set-up of a new fund with an interest rate of 4 per cent.
Regarding the matter, Bangladesh Finished Leather, Leathergoods and Footwear Exporters' Association (BFLLFEA) chairman Mohiuddin Ahmed Mahin said, "We don't have enough money to buy leather unde the current circumstances. Leather cannot be bought again if the banks give money as per the conditions of the previous fund. Therefore, we have proposed to raise a new fund.”
“Neither the ministry nor the central bank has informed us about their decision yet. We hope they will meet us early next week.” he claimed.
A commerce ministry official on condition of anonymity said, "We have received the proposals from and furhter course of action will be taken soon."
Last year, the country's leather exports fell short of the target by 28 percent. Exports of processed leather and leather shoes faced the brunt of the shortfall. Traders said the tanneries still have unsold leather worth Tk 700 crore. According to them, the purchase of rawhide this year entirely dependent on banks and financial institutions and their loan conditions.
Shahin Ahmed, president of the Bangladesh Tanners Association (BTA), said, "Leather worth around Tk 600-700 crore remained unsold from the previous year and we are yet to get any LC."
Another problem, mentioned in the letter, for the leather industry as a whole is the pollution occuring during the production process. The economist thinks that the coronavirus pandemic has worsened the situation further.
