The country’s apparel makers are facing significant challenges in banking processes, particularly with issues related to raw material imports and export proceeds receipts, according to a study.

The most pressing concerns include delays in opening letters of credit, high bank charges and payment receipt delays, which are disrupting trade operations, Bangladesh Institute of Development Studies research director Monzur Hossain said in a study.

The study findings presented on the second day of the Annual BIDS Conference on Development 2024 held at Lakeshore Hotel in Dhaka on Sunday.

It showed that a staggering 40 per cent of surveyed firms reported delays in opening LCs as key bottleneck, hampering supply chains.

Three per cent of them faced difficulties in opening LCs due to the dollar crisis.

Sixteen per cent of respondents expressed concerns over delays in receiving payments, which impacts their cash flow and operational continuity.

Thirteen per cent reported that higher charges are adding to operational costs.

The study titled ‘Supply Chain Dynamics for Sustainable RMG Growth in Bangladesh’ conducted on 63 medium and large-sized garment factories, revealed that on average, 38 per cent of the firms sourced raw materials such as yarn, fabric, chemicals, trims, and accessories domestically.

Another 24 per cent relied on intermediaries or third parties for international sourcing, while the remaining 38 per cent directly sourced from international markets, the study found.

In terms of recommendations, 46 per cent of respondents suggested reducing bank transaction costs or charges, while 22 cent called for the use of TT payments.

Other recommendations included establishing precise exchange rates for the dollar, standardising LC charges across banks, reducing taxes, and adopting advanced technologies.

Some also stressed the importance of increasing domestic sourcing to avoid banking complications.

Monzur highlighted the challenges faced in timely sourcing of raw materials from foreign suppliers.

He suggested that direct marketing and eliminating intermediaries could help improve supply chain efficiency by meeting lead times, avoiding air shipments, and preventing order cancellations.

Addressing the impact of Bangladesh’s post-LDC graduation, Monzur said that the country would lose its duty-free market access to developed markets, including the EU.

Citing the reference of previous studies, he said that Bangladesh’s RMG exports could face duties ranging from 7 per cent to 14 per cent, and the sector could see a decline of 10.8 per cent in exports by 2031.

The total exports might decrease by 6 per cent, it mentioned.

The study suggested strengthening backward linkages by expanding fabric production capacity would enhance the competitiveness of the RMG sector.