Bank Issues Disrupt Export Payments in Bangladesh
Recent reports indicate that several banks are struggling to process payments for exporters, leading to significant delays in wage payments and creating fears of labor unrest. Key institutions like Exim Bank and Social Islami Bank (SIBL) are at the center of these problems, severely impacting the operations of numerous clothing exporters.
Exporters have voiced concerns, particularly regarding Exim Bank, which services around 254 clothing exporters, many of whom are still awaiting payments. However, the exact amount of stuck export revenue remains unclear.
According to insiders from the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the association’s leadership plans to discuss this crisis with the governor of Bangladesh Bank, Ahsan H. Mansour. BGMEA President Mahmud Hasan Khan Babu emphasized the urgency of the situation, stating that over 200 clothing exporters are unable to fulfill their payment obligations.
“How can factories pay their workers if the funds are tied up?” he questioned, adding that they would pursue assistance from the Bangladesh Bank.
A group of garment industry leaders, which included representatives from 11 affected exporters, had a meeting with Lieutenant Governor Zakir Hossain Choudhry, seeking solutions for their ongoing financial issues.
One exporter, who preferred to remain anonymous, mentioned that their company has about $50 million in goods stuck in Exim Bank, with most exporters facing similar challenges. “Even when revenue arrives, banks are holding back our payments,” he revealed. He also warned of a press conference if they can’t resolve the situation soon.
Another notable case is the Hannan Group, which relies heavily on Exim Bank for its operations. Managing Director ABM Shamsuddin shared that they haven’t received due payments despite submitting all necessary export documentation. He expressed frustration, saying, “They are holding onto millions of our export dollars. We are left wondering where the money actually goes.”
In typical export transactions, importers open letters of credit (LC) with banks to facilitate payments. Once goods are delivered, the banks settle payments to the exporters. However, problems arise when banks fail to process these payments promptly.
One impacted supplier, Saleudh Zaman Khan of NZ Textile Mills, reported that he hasn’t been paid for raw material supplies over the past nine months, with about $1 million currently stuck in the banking system. He mentioned being told by a bank that payments would not be made until they sorted out internal mergers.
Despite discussions about the scale of the issue, some bank officials argue that while around 300 exporters use their services, only a fraction—about 40—are facing payment delays. One bank chairman noted that panic during recent mergers has led to a decline in deposits and an increase in withdrawal requests, exacerbating the situation.
He criticized the government for its handling of the bank mergers, suggesting that if these changes were necessary, they should have been implemented promptly. Meanwhile, attempts to reach SIBL’s Vice President Maksuda Begum for comment were unsuccessful.
