Tanners and leather traders will get financial support of around Tk 4 billion to help boost rawhide trade during Eid ul-Adha, the second largest religious festival of Muslims and the busiest season for rawhide collection.

 Though most of the tanners and leather manufacturers are burdened with default loans, three state-owned banks are ready to disburse fresh loans to keep this thriving sector vibrant during Eid-ul-Azha.
Almost 60 percent of the country’s rawhide output is collected during Eid-ul-Azha.

Amid the corona pandemic, there is mounting concern over the sluggish financial capacity of the rawhide traders during Eid-ul-Azha.

During the last couple of years, tanners and leather sector entrepreneurs have been struggling with working capital and falling export earnings. The corona pandemic has pushed them into deeper trouble.

Shahin Ahmed, president of Bangladesh Tanner Association (BTA), said the leather sector entrepreneurs are going through tough times amid the relocation of factories to Savar coupled with the falling trend in exports.

“Owing to the fact, tanners and leather traders are burdened with loans,” he said, adding that capital crisis would hamper this year’s rawhide collection.

“There are many good traders with a good track record; they should get loans to keep the leather sector alive,” said Shahin Ahmed, adding that this year the banks are quite co-operative with the traders.     
Sector insiders think that rawhide collection will drop by 25 percent due to capital crisis and bad impact of coronavirus worldwide.

Three state-owned banks ready to provide loans

Despite a 90 percent defaulted loan to the tanner and leather traders, three state-owned banks are going to disburse fresh loans ahead of Eid.

This year, state-owned Sonali Bank, Janata Bank and Agrani Bank would disburse loans of around Tk 4 billion to the tanners and leather traders.

Taking cognizance of the present situation, Bangladesh Bank has also relaxed loan rescheduling opportunity for the leather traders.

Of the loans for this year, sources said Sonali Bank and Janata Bank have allocated Tk 1 billion each to disburse new loans while Agrani Bank would likely to lend Tk 1.85 billion to the tanner and leather sector entrepreneurs.

According to available data, the amount of loans disbursed in this sector is Tk 42.73 billion so far, of which, amount of default loan stands at Tk 38.45 billion.

A portion of the loan has been realized while a large portion of the loan has been adjusted based on the client-banker relationship.

Sonali Bank has disbursed loans of Tk 8.83 billion to 10 entrepreneurs in the last 7 years to purchase hide of sacrificial animals. Of which Tk 5.83 billion has become bad loans. Janata Bank has so far lent Tk 15.92 billion to the leather industries.

Agrani Bank has so far disbursed Tk 7 billion in leather industries. Of this, about Tk 5 billion has not been repaid yet. Rupali Bank disbursed Tk 10.98 billion in loans in the leather sector. But most of the loans have become a default.

Former Bangladesh Bank (BB) governor Dr. Salehuddin Ahmed told the Daily Sun that the main reason for defaulting loan in the leather sector is the non-cooperation of tannery owners.

They buy leather from seasonal traders at low prices and stock it to sell at higher prices, but even over time, the bank cannot recover the loan money after serving multiple notices, he said.

The former BB governor said the familiar clients and same tannery owners are getting leather sector loans from some specific bank again and again where the involvement of bank officials is also questionable.

Salehuddin, also, suggested strengthening the monitoring on behalf of the bank to recover the default loan from the leather sector.