HSBC Bangladesh has lent US$46mn to local apparel exporter Viyellatex Group, for the purchase of a new spinning mill.

The finance is guaranteed by Swiss Export Risk Insurance (SERV) and which marks its first private sector deal with HSBC Bangladesh.

The mill will cost US$121mn to purchase, with goods, equipment and technology coming from exporters in Germany, India, Japan, Switzerland and the UK. The remaining US$75mn will come in equity from Viyellatax.

The loan is US dollar-denominated and the Viyellatax chairman commented on what he considers to be competitive pricing. “Interest rate of the loan is much lower than other US dollar loans in the international market,” Rezaul Hasanat told local media.

The mill, which has already been constructed, will produce 50 tonnes of yarn each day, using 92,000 spindles. Ready-made garments account for more than 75% of Bangladesh’s exports.

While smaller exporters can often struggle to gain access to bank finance, the trade and export finance market for larger exporters has been growing, with international banks providing much of the foreign currency lending.

Speaking to GTR recently, Muhammad Shohiduzzaman, country head of global trade and receivables finance at HSBC, says: “International trade is one of the major economic activities in Bangladesh. Demand for trade finance has grown significantly over the last few years. We have observed a shift from sight letters of credit (LCs) to suppliers’ credit backed by usance LCs, which enable importers to access foreign currency funding with a more favourable currency and interest cost. The mode of export has also been gradually shifting from LC to contract and purchase orders with longer credit terms, creating a demand for supply chain financing to meet working capital needs.”

The bank’s CEO in Bangladesh, Francois de Maricourt, adds: “This transaction highlights HSBC’s leading position in export credit agency financing in Bangladesh, and demonstrates the growing relevance of export credit agencies for the local private sector.”