The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has issued a high-level directive to member factories, mandating enhanced due diligence on credit terms following a series of payment defaults by regional buyers. The alert was triggered by a specific case involving an Indian procurement house that failed to clear substantial export bills, causing severe liquidity strain for several medium-sized units. With Bangladesh’s apparel shipments to India facing a 5 per cent decline in late 2025 due to political and economic shifts, the association is now advising a transition away from ‘open account’ trading toward secure Letter of Credit (LC) mechanisms. This shift is critical as the sector manages a narrow 5–6 per cent growth projection for 2026, amid rising domestic costs and a 2.63 per cent drop in overall garment exports during the first half of the fiscal year.
Addressing the SME liquidity crisis
The payment disruptions have disproportionately impacted Small and Medium Enterprises (SMEs), which operate on thinner margins and face higher borrowing costs. In a February 2026 session with the Finance Ministry, BGMEA leadership warned, nearly 400 factories remain vulnerable to closure without immediate banking interventions. To mitigate systemic risk, the association is pushing for a Rs 14,000 crore soft loan package to assist factories in meeting wage obligations during periods of deferred payment. By integrating more rigorous buyer-rating systems and advocating for export credit insurance, the BGMEA aims to insulate the $39 billion sector from cross-border commercial friction. This strategic tightening of trade protocols is viewed as essential for maintaining industrial harmony and protecting the national goal of reaching $100 billion in apparel exports by 2030.
The BGMEA represents over 4,500 garment factories in Bangladesh, the world’s second-largest apparel exporter. Focusing on the EU, US, and emerging Asian markets, the association manages trade negotiations and labor compliance. Its 2026 roadmap prioritizes digital financial tools and market diversification to sustain a sector contributing over 80% to national export earnings.
