German mail-order giant The Otto Group is teaming up with the Grameen Trust to set up what it calls "the factory of the future," in which profits are ploughed back into the local community.

The new Grameen Otto Textile Company will be based in Dhaka, the capital of Bangladesh, and will produce clothing such as T-shirts, sweatshirts, shirts and blouses for export from 2011.

Under the scheme, the Otto Group has made an interest-free loan of around EUR2m (US$3m) to cover the investment costs of setting up and running and environmentally-friendly, carbon neutral factory.

This loan will then be paid back over a period of 10 to 15 years from the profits generated by the Grameen Otto Textile Company.
 
However, rather than distributing any additional income to shareholders or investors, it will be used instead to expand and modernise the company.

A share of the profits, which will be managed by the Grameen Otto Trust, will provide better working conditions for employees with food, further education, health care and child-care facilities.

And the local community is expected to benefit too, with assistance promised for the health sector, sanitary facilities, and education.

The factory will initially employee between 500 and 700 people on "an appropriate wage and with good social benefits."

But there are also plans in the pipeline to expand not only the Dhaka site, but also to take the concept elsewhere in Bangladesh and even to other countries as well.

The aim of the project is to give Bangladeshi poor the opportunity to lift themselves from poverty.

Professor Muhammad Yunus, founder of the Grameen Trust, says: "Poor people do not ask for charity, as charity is not a solution for poverty. They want to work in order to earn their livelihood.

"The Grameen Otto Textile Company creates work for the poor. It will act as an example against poverty in the world."

Dr Michael Otto, co-initiator of the project and chairman of the supervisory board of the Otto Group adds: "The Grameen Otto Textile Company will show that it really is possible to reconcile ecological and social criteria with economic goals.

"It should become a model for textile production in Bangladesh and for similar factories all around the world."

Nobel Peace Prize recipient Professor Muhammad Yunus is the founder of the Grameen Bank, which has lent over $8.4bn to micro-finance projects.

The $10bn Otto Group is the largest mail order group in the world and the second-largest online retailer after Amazon. It has nearly 50,000 employees and operates in 20 countries in Europe, North America and Asia.