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Bad practices lead to leather sector decay


Published : 23 Jul 2021 10:32 PM | Updated : 24 Jul 2021 12:15 AM

Payment irregularities and long standing bad practice in repayment of bank loans by the tanners are mainly responsible for the decay of the country’s leather sector.

Disbursement of loan sans proper process, allocation for small or weak organisations and also providing large volume of loans to  leaders of tannery associations are mainly blamed for the huge amount of Tk. 4000 crore of defaulted loans in the country's tannery sector.

Sector insiders also blame relocation of the tannery industry to Savar as also causing many tannery owners to become defaulters.

The country's leading nationalized commercial banks, Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, Basic and Bangladesh Development Bank (BDBL) disburse the most loans in the leather sector every year while among private banks Uttara and National Bank also disburse loans during the season.

According to information, the leather industry owes Sonali Bank a debt of Tk 150 crore. Of this, the regular amount is 43 crore taka. These loans have been given to 10 institutions. 

Of this, about 107 crore taka has been defaulted. The bank again paid Tk 25 crore to Bhulua Tannery, which is in a good position to repay the loan. Amin Tannery and Kalam Brothers Tannery got no loan this year because of their previous outstanding loan. 

Mohammadia Leather, Annan Footwear and Great Eastern Tannery have their arrears, but transactions are regular. However, the defaulter owes Tk 23 crore to Deshma Shoe Industries, Tk 10 crore to Excellent Footwear, Tk 14 crore to SNJT Footwear and Tk 6.2 crore to Versace Shoes.

The leather sector remains heavily under debt. The old loan disbursed in the leather sector from four state-owned banks is Tk 5,344 crore. The defaulted amount is about 4 thousand crore taka. 

Evidently, about four-fifths of the disbursed loans have been defaulted. The remaining debt of Tk 1,037 crore is regular. Meanwhile, four state-owned banks lent around Tk 390 crore for the purchase of skins from the animals sacrificed during the year’s Eid-ul-Azha.

According to sources, Janata Bank has so far lent more than Tk 4,000 crore to the leather industry. Most of them have become defaulters. Crescent Leather alone is the defaulter of 3.5 thousand crore taka. The rest belong to a few other organizations. 

Last year, the bank lent Tk 119 crore to 11 companies to buy skins of the sacrificial animals. The target was 100 crores. Not a single penny was returned. This time, Janata Bank had a target of disbursing Tk 140 crore worth of loan to a few more companies, both old and new.

The bank's board of directors firstly approved Tk 55 crore and then again Tk 77 crore.

An official said that this year also the central bank gave concessions. Based on that, the target of giving a loan of Tk 140 crore had been set. In the end, it was possible to pay around Tk 132 crore. Agrani Bank has a debt balance of Tk 534 crore in the leather industry.

Of this, large sums of money are outstanding even though they are regular. Some parts have become defaulters. So this time the bank gave a loan of Tk 70 crore. 

A top official of Agrani Bank, said that it decided to give loans only to leather traders who have repaid their previous loans in full. In addition, the borrower must be 100% in production.

This year they took a plan to lend out 70 crore while last year they disbursed Tk 51 crore.

Rupali Bank has so far disbursed loans worth Tk 703.90 crore to the leather sector. Of this, Tk 629.75 crore is regular and 74 crore taka has been defaulted. Among the defaulters, Hossain Brothers Tannery owes Tk 13.3 crore, Maizdi Tannery Tk 12 crore, Mizan Traders Tk 45.8 crore, Tawfiq Leather Tk 12.4 crore and JJ Leather Tk 1.6 crore.

Most of these defaulted loans are old; identified as defaulters since 1985. In the year 2020, a loan of Tk 155 crore was given to some customer organizations. 

Meanwhile, Bangladesh Bank in a circular, issued on July 13, said that raw leather traders will get new loans without a 15 percent deposit in advance. 

In addition, they will get the opportunity to reschedule the outstanding loan of 2020 for three years with 3 percent down payment and there must be adequate security for this.

Industries minister, Nurul Majid Mahmud Humayun, in a meeting before Eid-ul-Azha  assured the tanners of providing financial support to facilitate buying rawhides against the backdrop of the tanners' demand for special loans for purchasing the rawhides.

President of Bangladesh Tanners Association Shaheen Ahmed said that a stockpile of skins and hides worth around Tk 4.0-5.0 billion remained unsold at the Savar Tannery Estate.

Meanwhile many seasonal rawhide traders finally had to leave hundreds of unsold rawhides to rot on the road  because they were offered lower prices .

A trader told this correspondent that he paid Tk 300 to Tk 500 for each rawhide he collected on the Eid day on Wednesday, but the merchants offered an average of Tk 300 per piece.

Some of them alleged that merchants denied buying skins saying they cannot buy the rawhide as those began to rot due to faulty ways of preservation.  

It was found Thursday morning that city corporation workers removed the animal skins from the streets for dumping.

Meanwhile Tipu Sultan, secretary general of Bangladesh Hide and Skin Merchants Association, denied the allegation that they refused to buy rawhide at the prices expected by the seasonal traders.

“We bought rawhide at the prices set by the government, or at higher rates. But we would not buy rotten skins,” he said.

The government increased the prices of rawhide by Tk 5 per square foot during the Eid this year. The price of a square foot of salted cow or buffalo rawhide was set between Tk 40 and 45 in Dhaka, an increase from Tk 35-40 per sq ft last year.

Additionally, the government has paved the way for the export of 10 million pieces of wet blue leather over the next year, which is expected to create additional incentives for leather procurement.