Textile millers seek pre-shipment loan facility against back-to-back LCs

Textile mill owners have urged Bangladesh Bank to extend pre-shipment credit facilities against back-to-back letters of credit, similar to those currently available for export-oriented garment manufacturers.

In a letter sent to the central bank governor on 21 April, the Bangladesh Textile Mills Association (BTMA) said the existing financing structure mainly supports garment exporters under master LC arrangements.

A pre-shipment loan facility is short-term working capital financing provided by banks to exporters before goods are shipped, designed to cover costs like raw material procurement, manufacturing, packing, and transportation. It enables exporters to fulfill orders and is usually repaid once the export proceeds are realised, often secured by an LC.  

However, spinning and textile mills operating under back-to-back LCs are not clearly included in the pre-shipment credit framework, limiting their access to bank financing.

At present, commercial banks provide pre-shipment credit up to 5% of the total export value for garment exporters to support working capital needs before shipment.

BTMA leaders argue that a similar facility would help textile mills manage operational costs, including wages and utilities, during production cycles.

"If this credit support is extended, spinning mill owners will be able to cover daily expenses like salaries. Later, when payments from banks are received, the amounts can be adjusted just like in the garment sector," said Salehuddin Zaman Khan, former vice president of BTMA.