A shortage of letters of credit (L/Cs) may delay payments to garment workers in Bangladesh.

Trade associations are now warning that if the situation does not improve, labour disputes may erupt before the Eid-al-Fitr festival.

Alternative finance

Both the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) say that payments for thousands of garments have become uncertain because of the L/C shortage.

Banks are reportedly telling customers to find alternative ways to finance their exporting activities.

Liquidity shortage

One managing director of a knitwear factory said his bank told him that it simply did not have sufficient liquidity to make the L/Cs he needed available.

The BGMEA says it is in discussions with the Bangladesh Bank, which has said it will work with the industry to try and avert industrial action before the festival that marks the end of the holy month of Ramadan.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.