The government of Bangladesh has established a EUR50m (US$56m) loan fund to provide the country’s ready-made garment sector with medium-to-long-term finance for safety and environmental upgrades to factories.
The Bangladesh Bank fund has been agreed with French financial institution Agence Francaise de Developpement (AFD), and is aimed at making the Bangladeshi ready-made garment (RMG) sector safer – in terms of fire, electricity and building structure safety – greener, through the reduction of pollution, improved resource and energy efficiency, and a “decent place to work” in terms of social compliance through providing financial and technical support.
The announcement comes as a recent analysis of the government’s factory remediation data showed a “shocking level of unreadiness” to take over the Accord’s work. The analysis revealed none of the 745 factories under the government’s inspection programme have eliminated high-risk safety hazards – all of which were identified between three and five years ago.
In particular, the the fund will enable RMG factories to make investments related to safety retrofits and environmental upgrades, and provide an incentive to undertake such investments. Each eligible garment factory will get loans of up to EUR1m from the fund at a 7% interest rate. Larger upgrades could potentially be eligible for up to EUR3m.
The project will be implemented over a five-year period to 2022.
Apart from the loan fund, an additional EUR14.29m will be provided as a “technical assistance” grant to the successful garment factories, an initiative between the KfW Development Bank in Germany and the European Union.
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By GlobalDataThis three-year programme aims to enhance the financial sector’s capacity to address the funding needs of safety remediation and environmental upgrades of RMG factories; increase the knowledge of RMG managers in the areas of safety remediation and environmental upgrades as well as on available financial options; and increase and strengthen the supply of services by local service providers, particularly with regard to cost-benefit analysis and investment planning.
