State-owned four banks have disbursed Tk 2.3 billion only so far to the leather sector to purchase rawhide during Eid-ul-Adha, though they had set a target of lending Tk 6 billion earlier to facilitate rawhide purchase.
The traders have complained that rawhide collection at the peak season is being hampered because of inadequate bank loans coupled with declining sales in the global market.However, the banks have remained cautious in lending to the leather sector as previously disbursed 70 percent loans in the sector has turned out to be default loans.
This year, even half of their lending target has not yet been achieved.
The government's pricing, export opportunities, lending to raw leather traders on a priority basis and rescheduling facilities to banks are not being disciplined in any way.
According to traders, half of the collected leather remains unsold every year due to declining sales in the global market.
The tannery owners claim that this is the reason for the financial crisis in the sector.
Mizanur Rahman, treasurer of the Bangladesh Tanners Association, said, "I requested banks to give us fresh loans with a focus on the current situation. But the banks did not pay heed to us.”“For this, we are not able to repay our loans on time,” he added.
There is also an argument in government banks for not giving loans as a large part of the loans given by Agrani, Sonali, Rupali and Janata Banks to buy rawhides last year is still unpaid. According to the central bank, about 70 percent of the Tk 80 billion credit disbursed to the leather sector in last few years has become defaulted loans.
On the occasion of Eid-ul-Adha, Bangladesh Bank directed banks to provide loans on priority basis so that traders and industrial establishments of the leather industry can purchase rawhide.
Not only that, the central bank also advised bans to consider the issue of taking collateral for lending flexibly.
Earlier on July 5, Bangladesh Bank issued a circular with offering special opportunity to reschedule loans to the real leather traders with a view to streamline the flow of money to genuine leather traders for smooth buying and storage of sacrificial animal hide during the Eid-ul-Adha. It offered loan rescheduling facility with only 2 percent down payment. Then, rescheduled loan repayment period will be 8 years, including one year grace period.