Beyond RMG: Financing Bangladesh's next export champions

For decades, Bangladesh's export success has been synonymous with ready-made garments. The sector accounts for the lion's share of the country's merchandise exports and has built a globally competitive manufacturing ecosystem.

But as Bangladesh prepares to diversify its export basket and graduate from least developed country status, the country faces a critical question: can its financial sector provide the right kind of financing to turn promising non-RMG businesses, especially that have a great export potential?

The answer could determine whether Bangladesh's export diversification strategy remains largely a policy ambition—or becomes a broader industrial transformation.

Recognising the financing challenge, Bangladesh Bank introduced a Tk3,000 crore Export Diversification Refinance Scheme in early June 2026 to support export-oriented industries beyond garments.

Under the scheme, Bangladesh Bank will provide refinancing to participating financial institutions at 4% interest, while exporters will be able to access financing at a maximum rate of 7%. The revolving fund will be created from excess liquidity held by scheduled banks.

The initiative is significant because access to affordable finance has long been identified as one of the major constraints facing emerging export sectors.

The scheme targets industries identified as high-priority and special-development sectors under the Export Policy 2024–27. Priority is also being given to exporters using locally sourced raw materials, particularly in sectors such as leather and jute. Financing can be provided through term loans or investments in local currency.

A different financing need beyond garments

For banks, the initiative creates an opportunity to move beyond conventional trade finance for the RMG sector and develop expertise in financing pharmaceuticals, information technology, agro-processing, leather, light engineering and other high-potential industries.

Banks already play a crucial role in Bangladesh's export ecosystem through letters of credit, working-capital loans, import financing, and pre-shipment and post-shipment finance.

Bangladesh Bank has also extended its pre-shipment credit refinance scheme until December 2030. Such facilities are particularly important for smaller exporters that need financing months before receiving payment from overseas buyers.

Central Bank's Export Development Fund (EDF) allows authorised dealer banks to obtain dollar refinancing against foreign-currency loans extended to manufacturer-exporters for importing production inputs. 

In July 2026, Bangladesh Bank issued a unified EDF master circular and allowed authorised dealer banks to finance eligible imports from their own foreign-currency resources using up to 50% of their NFCD balances. This could increase banks' ability to provide foreign-currency funding to export-oriented manufacturers.

But financing the next generation of exporters may require more than traditional working-capital and trade finance.

Businesses in sectors such as pharmaceuticals, light engineering, leather and agro-processing often need substantial investment in machinery, technology upgrades, quality-control facilities, certification and environmental compliance before they can compete in global markets.

Is access to finance remains a challenge? 

Despite these initiatives, entrepreneurs have mixed views about access to bank financing. SME entrepreneurs, in particular, often face significant challenges in accessing finance.

Entrepreneurs say that financing is only one part of the problem. Other bottlenecks include taxes and tariffs, inadequate government policy support, disadvantages compared with competitors in customs and port infrastructure, and lengthy process in obtaining approvals from government agencies.

Together, these factors make it harder for businesses to scale up and compete internationally.

Entrepreneurs therefore argue that removing financing constraints alone will not be enough. The broader business environment also needs to become more predictable and competitive.

Banking sector stakeholders, however, have a different perspective.

They say businesses with sound Credit Information Bureau (CIB) records and adequate supporting documents should not face major difficulties in obtaining loans, even if they operate outside the garment sector or are relatively small enterprises.

A senior banker, speaking to The Business Standard on condition of anonymity, said, "If a business is performing well and has supporting documents, banks provide loans."

"But if the CIB report is not good, there is no scope for the bank to support that business," he said, adding, "Banks are not charitable organisations. Just as customers want to get money whenever they need it, banks also do not want to take risks by lending to businesses with a poor repayment record."

Financing alone cannot create export champions

The debate highlights a broader reality: cheap credit alone will not automatically create globally competitive exporters.

Banks and NBFIs will need to develop sector-specific expertise to assess businesses whose cash flows, collateral structures, production cycles and international markets can differ significantly from those of traditional garment exporters.

For entrepreneurs, financing is also needed for much more than day-to-day operations.

They need capital for technology, product development, international certification, energy efficiency, environmental compliance, quality improvement and market expansion.

The real test, therefore, is whether financial institutions can transform policy facilities such as the Export Diversification Refinance Scheme into financing that is accessible, timely and commercially viable for businesses outside garments.

Government looks beyond RMG

The government's next Five-Year Plan also signals a stronger push for export diversification, with special emphasis on 10 high-potential sectors beyond RMG.

Among the priority sectors are leather and footwear, pharmaceuticals, shipbuilding and light engineering, agro-processing and fisheries-based products, creative economy and blue economy industries.

The government also aims to increase foreign direct investment from 0.45% to 2.5% of GDP over the five-year period.

Key policy priorities include policy integration and predictability, tariff rationalisation and free-trade agreements following LDC graduation, improving the ease of doing business, fast-tracking administrative processes, and expediting company and business approvals.

These measures suggest that the government increasingly recognises that export diversification requires more than identifying promising sectors.

It requires an ecosystem in which businesses can obtain financing, import machinery and raw materials efficiently, secure regulatory approvals quickly, access infrastructure and compete in global markets.

The real test

Bangladesh has already demonstrated that it can build a globally competitive export industry. The success of RMG shows what can happen when entrepreneurs, workers, infrastructure, policy support and finance come together.

The challenge now is to replicate that success across a wider range of industries.

If banks and NBFIs can move beyond conventional trade finance and provide the right mix of working capital, foreign-currency finance, equipment finance and long-term investment, Bangladesh's export diversification strategy could move beyond policy documents and become a financing-led industrial transformation.

The next generation of export champions may not come from a single sector. They could emerge from pharmaceuticals, leather, agro-processing, ICT, light engineering, shipbuilding and other industries.

But for that to happen, Bangladesh's financial sector must be ready to finance their journey—from promising enterprises to globally competitive exporters.