Export Development Fund(EDF)

Export Development Fund (EDF)

Export Development Fund (EDF) is a special credit window created by Bangladesh Bank to provide short-term finance in foreign currency for import of raw materials by opening L/C at sight by the export oriented garment industries.
At the request of the Bangladesh Government with a view to developing its export, the International Development Organization (IDA) established an export development fund in the Bangladesh Bank (Loan – 2000 BD). In this respect a treaty was signed with IDA on 26 April 1989 and the project started its activity from October’ 89.

The Export Development Fund (EDF) is a financial mechanism, often government-backed or managed by a central bank, designed to promote and strengthen a country’s export sector. The specific goals, structure, and functions can vary by country, but common objectives include:

Providing Financing: Offering foreign exchange or local currency financing (loans, grants, advances) to manufacturer-exporters, often for input procurements like raw materials.
Boosting Competitiveness: Helping exporters remain competitive in the global market, sometimes through cheaper credit than commercial rates.
Infrastructure Development: Funding projects that support the export infrastructure, such as training institutes, common facility centers, cargo complexes, and effluent treatment plants.
Market Development: Supporting activities like participation in international exhibitions, research, and market/product development initiatives.

Examples of Export Development Funds in different countries:

Bangladesh: The EDF, managed by Bangladesh Bank, primarily provides foreign exchange financing for manufacturer-exporters’ input procurements.
Pakistan: The EDF, an autonomous body under the Ministry of Commerce, focuses on strengthening and developing infrastructure for export promotion, funding projects like training institutes and common facility centers.
Malawi: The Export Development Fund (EDF) Limited, a Development Finance Institution wholly owned by the Reserve Bank of Malawi, provides financial and advisory services to businesses in export-oriented sectors.
India: An EDF facility was set up under the Export-Import Bank of India (Exim Bank) Act to enhance international trade and encourage exports, offering grants to support marketing, product development, and technological knowledge for exporters.
Canada: Export Development Canada (EDC) is a Crown corporation that provides credit insurance, financing, and bonding solutions to help Canadian companies sell their goods and services internationally.

Based on your confirmation, I will provide a detailed overview of the Export Development Fund (EDF) in Bangladesh.

The EDF in Bangladesh is a crucial foreign currency financing tool managed by Bangladesh Bank (the central bank) to support the country’s export-oriented industries.

Core Purpose and Function

Objective: To facilitate access to foreign exchange financing for the procurement of raw materials and inputs by manufacturer-exporters.
Mechanism: Authorized Dealer (AD) banks borrow US Dollar funds from the EDF and then lend these funds in foreign currency to eligible manufacturer-exporters against their back-to-back import LCs (Letters of Credit) for inputs against confirmed export orders.
Target Beneficiaries: Primarily manufacturer-exporters who produce goods for direct export, as well as producers of intermediate goods for local delivery (deemed exports) to final exporters (e.g., textile mills supplying yarn to garment factories).

Key Features and Recent Changes (As of late 2024/early 2025 data)

The EDF has been subject to significant adjustments in recent years due to the foreign exchange reserve situation in Bangladesh, often in line with International Monetary Fund (IMF) conditions.

Feature	Details	Recent Changes/Context
Fund Management	Managed by the Forex Reserve and Treasury Management Department (FRTMD) of Bangladesh Bank.	The fund size has been significantly reduced from a peak of $7 billion (around 2022) to help bolster the central bank’s net foreign exchange reserves. Allegations of fund misuse/smuggling also prompted cuts.
Loan Tenor	Repayable upon receipt of export proceeds, typically a maximum of 180 days from the date of disbursement, though it can be extended.	Repayment periods have been a focus, with efforts to ensure timely repatriation of export proceeds.
Interest Rate	The interest rate charged to exporters is variable.	The rate has increased to discourage unnecessary borrowing and manage the foreign currency reserve. The interest rate is now typically determined by adding a margin to the Secured Overnight Financing Rate (SOFR), for example, SOFR + 1.50% p.a. for the exporter. (The SOFR rate itself fluctuates).
Loan Ceiling	Maximum loan limits are set for individual exporters and member mills of different trade associations.	The maximum limits have been reduced. For general back-to-back LC imports, the ceiling has been cut (e.g., from $15 million to $10 million). Limits for major associations like BGMEA and BKMEA members have also been reduced.
Eligibility	Manufacturer-exporters meeting minimum value addition criteria and other foreign exchange regulations. The loan must be for input procurements against a firm export order.	Exporters with defaulted export proceeds repatriation are not eligib

Initial Proposed fund for 31.20 mUS$ was arranged as under:
i. IDA – 25.00 mUS$
ii. Bangladesh Govt. – 5.00m US$
iii. US Aid – 1.20 mUS$

Objectives:
• To help import financing for the exporters of non-traditional items, especially where high value addition is maintained.
• To grow confidence of foreign suppliers.
• To expedite high value added export where import is made under BTB LC under bonded warehouse system.

Features
1. Limit US$500,000.00 for single import bill.
2. Aggregated amount US$20,00,000.00 to single importer at the time of disbursement.
3. Interest LIBOR + 1% and 10% for interim period
4. To be refunded within 180 days from the date of receipt of fund from Bangladesh Bank (may be extended to 270 days for special case)

Procedures:
1.Intimation to Bangladesh Bank:
• At the time of opening EDF BTB LC, intimation in a prescribed form stating details of LC is given to Bangladesh Bank through International Division.
• The branch will claim for disbursement of EDF sub-loan immediately after receipt of Negotiated import bills complying credit terms from the negotiating bank abroad.
• The branch will submit following returns/statements in respect of L/Cs opened under EDF:
 L/C opening statement under EDF daily
 Monthly statement of L/Cs opened under EDF (within 7 days of month following the month to which it relates)
At the time of opening LC the following voucher are passed:
Dr. Customers liability on EDF LC ( @ B.C. Selling)
Cr. Bankers liability on EDF LC ( @ B.C. Selling)
Dr. Customer A/c
Cr. Income A/c commission, charges, etc.
2.Lodgement of Documents:
After receiving credit conform negotiated documents they are lodged and reversal voucher of LC liability is passed.
Dr. Banker’s liability on EDF LC ( @ B.C. Selling)
Cr. Customer liability on EDF LC ( @ B.C. Selling)

3.Payment of EDF LC:

Step-1
After lodgment of import bill, payment to the negotiating bank is settled by creating EDF Loan. then vouchers are passed as follows:
Dr. PAD EDF Loan (@ OD sight)
Cr. General A/C – ID, Head Office (IBCA)
A payment instruction is given to the bank through which payment will be settled.
At the same time requisition for fund is forwarded to Bangladesh Bank through ID.

Step-2
International Division, after getting requisition of other branches, forward an accumulated requisition to Bangladesh Bank.

Step-3
Getting fund from Bangladesh Bank, ID credit the same to branch by IBCA.
Then the branches respond IBCA as follows:
Dr. General A/C – ID Head office (Responding)
Cr. FC Held EDF Loan

Step-4
When export is done and proceeds are realized then the EDF Loan account is adjusted and fund is returned as follows:
Dr. FC Held EDF
Cr. EDF Loan A/C

Step-5
Return of fund:
Dr. FC Held account for BTB payment (Bill value + intt. for interim + LIBOR
+1%) (@OD sight export)
Cr. MBL General A/C (IBCA on Bangladesh Bank account)
(with interest @ LIBOR rate)
Cr. MBL General Account on Nostro (for interest amount)
Dr. MBL General Account on Nostro (for interest amount)
Cr. I/A interest on EDF
Cr. I/A Exchange gain

Example
Bill amount :US$50,000..00
Bill payment date : 14.05.2008 (EDF Loan creation date)
Fund received date : 27.05.08
EDF adjustment date : 12.11.08

Calculation
Bill Amount 50,000.00
Intt. for 13 days @ 10.00% 180.56
Intt. for 169 days @ 1% 234.72
Intt. f or 169 days @2.85% (LIBOR) 668.96
51,084.24

Vouchers:
Dr. FC Held BTB payment account
$51,084.24 @68.20 Tk.34,83,945.17
Cr. IBCA on B.Bank $50,000.00 @ 68.20 Tk.34,10,000.00
$668.96 @ 68.20 Tk. 45623.07
Tk.34,55,623.07
Cr. IBCA on AMEX NY (for sale of margin)
$415.28 (180.56+234.72) @ 68.20 Tk.28,322.10
Dr. IBDA $415.28 @ 68.25 Tk.28,342.86
Cr. Intt. on EDF Tk.28,322.10
Cr. I/A Exchange gain Tk. 20.76