BB's refinancing facility for jute industry

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Offline Rozina Akter

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BB's refinancing facility for jute industry
« on: April 08, 2014, 05:04:08 PM »
The move by the Bangladesh Bank (BB) to create a Tk 2.0-billion fund for refinancing the country's jute mills - both state-owned and private - and raw jute traders has merit but is fraught with risks. This follows the government's refusal to provide a payment guarantee against the scheme. Against the backdrop of incurring heavy losses by jute mills under the Bangladesh Jute Mills Association (BJMA) despite the earlier injection of Tk 5.0 billion into the body for resuscitating its units under a 20-year programme, the government's refusal to provide further such guarantee is understandable. Now, will the fresh fund to be disbursed through commercial banks at as low an interest rate as 9.0 per cent improve the performance of the loss-making units? If this is just a desperate attempt to save the dying factories, what should count most is the viability of those units. A comprehensive assessment of the factories is well in order to see if they can survive after further injection of funds.

Common sense dictates that jute mills should not incur losses in normal situations, particularly at a time when people the world over have made known their preference for natural fibre to artificial ones. Jute has staged a comeback in more ways than was imaginable a few years ago. In the Indian state of Paschimbango, it is now a thriving industry and farmers at the grass-roots level too feel encouraged to cultivate jute there because of the proceeds from the crop. Why it is completely reverse in the case of Bangladesh is beyond comprehension. When Bangladesh produces the best quality of jute, superior to that produced in Paschimbango, the sluggish demand for jute at the farmers' level and the losses incurred by jute mills here point at problems at the level of policy-making and management. How the central bank proposes to lift the sector from this moribund state is not yet clear. But about one thing there is no doubt that immediate closure of factories will be suicidal.

Already farmers have lost their interest in jute cultivation because of uncertainties over sale of their crop and price tags. If the 20 per cent loans of the Tk 2.0 billion fund earmarked for jute traders are properly used for jute procurement, at least jute farmers are not expected to face trouble in disposing of their produce at a reasonable, or some cost-plus, price. But how is it to be ensured that the money will be used for the intended purpose? Conditions attached to loan sanctioning have to be all-inclusive and stringent so that the exercise does not add to the country's default culture. All will agree that revival of the jute sector at this juncture of civilisation concerned with environmental backlash will be a plus point for Bangladesh. But the people running the show at the manufacturing level seem to be busy with things other than their main job -that is to make the units profitable. If people across the border can capture the international market, there is no reason why Bangladesh should fail to claim its rightful share.
Rozina Akter
Assistant Professor
Department Of Business Administration

Offline Nusrat Nargis

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Re: BB's refinancing facility for jute industry
« Reply #1 on: April 08, 2014, 05:40:10 PM »
good one.
Nusrat Nargis

Assistant Professor
Department of Business Administration
Daffodil International University

Offline Rozina Akter

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Re: BB's refinancing facility for jute industry
« Reply #2 on: May 25, 2014, 02:59:13 PM »
Thank you madam :)
Rozina Akter
Assistant Professor
Department Of Business Administration

Offline fatema nusrat chowdhury

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Re: BB's refinancing facility for jute industry
« Reply #3 on: July 22, 2014, 12:06:38 PM »
Informative sharing. Thank you :)

Offline Rozina Akter

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Re: BB's refinancing facility for jute industry
« Reply #4 on: September 17, 2014, 03:14:18 PM »
 :)
Rozina Akter
Assistant Professor
Department Of Business Administration