Bangladesh Bank has created a BDT 20 billion revolving pre-finance scheme for the leather and leather goods industry, requiring borrowers to obtain international environmental certification and source at least 10 percent of their electricity from solar power within two years of receiving a loan.

The scheme, funded from the central bank’s own resources, will offer loans at a maximum interest rate of 7 percent over a three-year revolving period, according to policy rules published on Thursday.

Tanneries and leather product manufacturers can borrow up to BDT 300 million per customer, with a debt-to-equity ratio capped at 70:30. The facility also covers auxiliary industries, cold storage construction, effluent treatment plants, solid waste management and clean technology adoption.

Existing tanneries and leather goods manufacturers can borrow up to BDT 100 million each for factory upgrades, expansion and modernisation, while new leather goods plants may access up to BDT 200 million. Businesses are also eligible for working capital loans of up to BDT 300 million, alongside BDT 50 million capped financing for supporting product manufacturers.

The policy gives priority to raw leather processors. Borrowers must secure approvals from local authorities, the factories inspectorate and the environment department. Companies already holding loans from the Export Development Fund, the Export Facilitation Pre-finance Fund or any other government or central bank scheme are ineligible, as are defaulters.

Term loans carry a maximum seven-year tenure with up to a two-year grace period. Working capital loans are limited to one year, renewable for up to three years subject to satisfactory transaction records. Banks must sign participation agreements with the central bank and submit pre-finance applications within 15 working days of approving a loan.

Participating banks bear full responsibility for credit risk, customer selection, collateral and recovery, and are required to inspect factories quarterly and collect sales and revenue reports.

The policy stipulates that failure to secure Leather Working Group certification or meet the solar power target within two years will bar borrowers from future access to this scheme or any other Bangladesh Bank fund.