The FINANCIAL -- IFC, a member of the World Bank Group, on July 7 announced a wide-ranging program to make Bangladesh’s garment industry safer for workers, providing $50 million to local banks and forming partnerships with leading international buyers. This is IFC’s first deployment of long term financing to Bangladeshi banks.
Bangladesh’s ready-made garment industry employs more than 4 million people—mostly women—in about 4,500 factories. The sector accounts for about 80 percent of the country’s exports. Despite a strong desire to improve worker safety, many factories have found it difficult to access the capital necessary to make the improvements necessary to meet buyer’s standards, according to IFC.
Under the program, IFC will provide $10 million each in financing to five Bangladeshi banks which will allow participating banks to increase lending to garment factories specifically to improve their structural, electrical and fire (SEF) safety infrastructure. Prime Bank Limited has already signed up to the initiative, and four other Bangladesh banks are expected to follow in the coming weeks.
In addition, IFC signed separate cooperation agreements with the Alliance for Bangladesh Worker Safety (Alliance) and the Accord on Fire Safety and Building Safety in Bangladesh (Stichting Bangladesh Accord Foundation), who represent dozens of the world’s leading garment brands. The two organizations will assist garment factories to undertake the SEF upgrades, and monitor compliance.
“Broad, innovative partnerships are necessary to improve the safety of workers in this critical industry,” said IFC CEO and EVP Jin-Yong Cai. “Banks, international buyers, and manufacturers have a shared interest in this issue because it’s indispensable to making Bangladeshi garment factories more competitive and sustainable.”
The Alliance and the Accord will each contribute $250,000 to support the program implementation. Together with IFC, the Accord and Alliance have both provided training to participating banks on the factory remediation process and understanding the resulting SEF corrective action plans (CAPs), and they are monitoring factory progress on compliance against these CAPs.
Speaking at the signing, the Honorable Ellen Tauscher, Independent Chair of the Alliance, said “The Alliance for Bangladesh Worker Safety (Alliance) is focused on ensuring workers in the garment sector have a safe and secure working environment, Alliance Members have dedicated significant resources to this goal. Providing long term loans to factory owners to undertake and implement remediation is an ongoing effort and this joint initiative will allow for a wider group of factory owners to have access to financing. The Alliance is pleased to have this partnership with the IFC.”
Rob Wayss, Executive Director of the Accord, said “The aim of the Accord on Fire and Building Safety in Bangladesh is to make the RMG sector in Bangladesh safe and sustainable. Accord signatory companies have invested considerable financial and technical resources to meet this aim. The IFC remediation financing program is an important contribution to the Accord’s ongoing efforts to ensure necessary remediation at inspected factories and meets an express request of local industry. The Accord is pleased to be working with the IFC in supporting factories, particularly the smaller and medium sized ones, who are in need of access to this type of affordable long term financing.”
It is expected that the program will be scalable and replicable in other countries around the world.