New crop of garment entrepreneurs shun bank loans amid soaring borrowing costs
According to industry insiders, this defining shift comes at a time when commercial lending rates have hovered close to 15%
A new wave of debt-averse apparel entrepreneurs in Bangladesh are avoiding commercial bank loans to drive business recovery, opting instead to rely heavily on personal savings, family financing, and partnered resources amid soaring borrowing costs.
According to industry insiders, this defining shift comes at a time when commercial lending rates have hovered close to 15%.
With the garment sector's profit margins squeezed to less than half that level, entrepreneurs warn that sustaining a manufacturing business through traditional bank borrowing has become nearly impossible.
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Instead of turning to institutional debt, these self-funded operators are pooling personal assets to tap into emerging market opportunities out of pure optimism.
Many have spent over a decade working within the sector before choosing to launch independent ventures.
Among them is Yeahiya Khan, managing director of Stylomore Limited, who spent 12 years gaining industry experience before pooling personal resources with partners.
The capital was used to launch a mid-sized garment factory in a rented building.
Yeahiya said that by starting small and intentionally avoiding bank loans, the company has already successfully begun receiving work orders.
Taking a similar route, Jasim Uddin, managing director of Fashion Floor BD Ltd, established a 950-worker facility in his own building.
The entire setup was funded using personal savings and family financing to avoid the risks associated with current lending rates.
"With lending rates now close to 15%, while profit margins are less than half that level, it is very difficult to sustain a garment business through bank borrowing," he said.
Industry leaders said a series of investment-friendly measures introduced by the government has improved business confidence, although they stressed that effective implementation will be key to sustaining fresh investment.
Among the measures announced in the budget is an approximate Tk20,000 crore fund aimed at reviving closed garment and textile factories.
Recently, the government also raised the cash incentive for apparel exports using locally produced yarn to 5% from 1.5%.
Tax relief has also been extended to several sectors.
While Bangladesh's apparel sector is undergoing a sharp structural shift, with more than 100 factories shut down and another 50 executing mass layoffs, cutting roughly 1,80,000 jobs over the last six months, beneath this wave of closures lies a resilient counter-current.
Nearly 70 new factories have entered the pipeline or begun operations, generating 60,000 new jobs driven by major corporate expansions and a new wave of debt-averse entrepreneurs, according to data from Bangladesh Employers' Federation.
Unlike past growth cycles heavily reliant on basic garment assembly, the latest wave of investment focuses on backward linkages, capacity expansion, and high-value accessories in addition to an avoidance of traditional bank loans.
