Overview of EDF ?

• Jul 09, 2020
• world banks
• 6 comments

Bankers Of the Article

 

Overview of EDF ?

 

To boost up the export of non-traditional product by facilitating access to financing in foreign exchange for input procurements by manufacturer-exporters a refinancing fund of USD 30 million was created with the collaboration of IDA and Bangladesh Government in 1989 is known as EDF.  

 

The size of EDF is USD 1.8 Billion.

 

Eligible parties and Interest rate of EDF:

 

  Any manufacturer-exporters (Direct/Deemed exporter) can avail EDF facility through AD Banks.   Interest Rate:   ADs will be charged by BB   @ six-month USD LIBOR+1.00% Customer is charged by ADs @ six-month USD LIBOR +2.50%  

 

EDF facility is available in two mode:

 

1. Import against export order

Any manufacturer-exporter can avail EDF loan against a specific Export order upto input imports permissible limit against an export LC/firm export contract/inland back to back LC.

1. Bulk based import

Member mills of some exporters association are allowed to access EDF  facility for import raw materials in bulk based without export order.  

 

Tenor of EDF loans:

 

EDF loans are repayable by the ADs upon receipt of proceeds of the relative export. In all cases within 180 days from dates of disbursement. Extendable by BB up to 270 days upon application explaining the necessity of longer period for repatriation of export proceeds.  

 

Eligibility for EDF loans:

 

1. i) Input imports must be in full compliance with the value addition criterion and other requirements of the government’s Import Policy Order (IPO) and instructions laid down in the GFET-2009 and subsequent circulars of BB.
2. ii) Input imports of a manufacturer-exporter defaulting in repatriation of export proceeds within 120 days from date of shipment, or such extension as permitted by BB will not be eligible for financing from the EDF besides other usual regulatory penalties.

iii) The loans to manufacturer-exporters to be eligible for EDF financing must be within the single borrower exposure limit.

1. 1. iv) Direct exporters are allowed for EDF financing against BTB import LCs/inland BTB LCs. Deemed exporters can avail the facility for supply of intermediate output to the manufacturers of the final export.

 

 

Amount of EDF loans:

 

1. Import Against export order

For manufacturer-exporters an EDF loan to an AD shall not    exceed i) the limit of input imports permissible against an export LC/firm export contract/inland BTB LC under the IPO in force, or ii) USD 15 million, whichever is lower.

1. Bulk based import

Member mills of some permitted exporters association are allowed to access EDF facility for import raw materials in bulk based without export order. The following chart may be seen:

 

Name of the Association	Limit set by BB, in USD
BGMEA/BTMA	The amount in foreign exchange realized against inland BTB LCs over the past 12 months.	25 million	whichever is lower
Bangladesh Dyed Yarn Exporters Association	Do	15 million	whichever is lower
Bangladesh Garment Accessories & Packaging Manufacturers & Exporters Association	Do	2 million	whichever is lower
Bangladesh Plastic Goods Manufacturer and Exporters Association	The amount in foreign exchange realized against inland BTB LCs and export LCs over the past 12 months.	1 million	whichever is lower
Leathergoods & Footwear Manufacturers & Exporters Association of Bangladesh	Estimated requirements for upto one year, based on their export performance over the preceding year.
Bangladesh Ceramic Wares Manufacturers’ Association	Do

 

Permissible Input procurement by for association:

 

Name of the Association	Permissible Input procurement
Bangladesh Textile Mills Association (BTMA)	Raw cotton and others fibre
Bangladesh Dyed Yarn Exporters Association  (BDYEA)	Unprocessed yarn and Chemicals
Bangladesh Garment Accessories & Packaging Manufacturers & Exporters Association (BGAPMEA)	Raw materials

Bangladesh Plastic Goods Manufacturer and Exporters Association (BPGMEA)	Raw materials
Leather goods & Footwear Manufacturers & Exporters Association of Bangladesh (LFMEAB)	–
Bangladesh Ceramic Wares Manufacturers’ Association (BCWMA)	–

 

Procedure of application for EDF loans:

 

Head offices/principal offices of AD banks shall submit to FRTMD, BB duly filled in application in Form-A after the input procurements financed by them in foreign exchange, against which they are seeking the EDF loans. The application, signed by two appropriately empowered officials will also authorize BB to realize the principal and accrued interest on the EDF loans to the ADs immediately upon expiry of the permissible periods of the loans by debit to the FC clearing accounts of the concerned ADs with BB; unless repaid by them earlier. Repayment advices of the ADs should be accompanied by calculation worksheets in Form-B Monthly statements detailing the outstanding USD loans of ADs to customers against which EDF financing have been drawn should be submitted in Form-C by head offices/principal offices of the AD banks by the second week of the following month.  

 

Accounting Procedure:

 

Journal Loan to Importer/Exporter   Dr      XXX Nostro A/c                                                     Cr  XXX   Clearing A/c                               Dr      XXX To Loan/Fund from BB                              Cr  XXX   Balance Sheet   Assets Loan to importers/Exporters         XXX   Liability Loan/Fund from BB                      XXX  

 

Present status of the use of EDF loan:

 

Name of the Member’s  Association	Uses (%)
1)     BGMEA	56%
2)   BTMA	21%
3)   BKMEA	11%
4)   Bangladesh Dyed Yarn Exporters Association	1%
5)   Bangladesh Garment Accessories & Packaging Manufacturers & Exporters Association	7%
6)   Bangladesh Plastic Goods Manufacturer and  Exporters Association	1%
7)   Leather goods & Footwear Manufacturers & Exporters Association of Bangladesh	1%
8)   Bangladesh Ceramic Wares Manufacturers’ Association	1%
9)   Others	1%
Total	100%

 

Some Issues:

• Concerns (all type) situated in EPZ are not eligible to avail EDF as IPO is not applicable for them.
• EDF facility can be availed for supplying raw materials to EPZ concerns as this kind of supply are treated as foreign export.
• EDF is allowed only for Sight import not for deferred import (through DP L/C the importer is already enjoying a facility).
• When an exporter avail credit facility from different Banks against the same exporter order, EDF can not be allowed due to complexity in value addition calculation

 

EDF Related Circulars:

 

Year	FE. Circular No.	Subject
2009	25/2009	Master Circular
2010	19/2010	Interest rate on EDF loans
	20/2010	Enhancement of EDF
2011	21/2011	Inclusion of ERC No. for loan from EDF
2013	04/2013	Inclusion the name of BGAPMEA for bulk import
	13/2013	Increasing the limit of BTMA and Inclusion the name BPGMEA of for bulk import
	15/2013	Interest Rate on borrowing from EDF
	16/2013
2014	26/2014	Increasing the limit of BTMA and General Exporters to 15 million
	30/2014	Increasing the limit of BGAPMEA to 1.0 million
	34/2014	Increasing the limit of BPGMEA to 1.0 million
	35/2014	Inclusion of the name of BDYEA