BB to create $500m green fund for textile
The central bank will set aside $500 million of low-cost funds for textile factories to help them adopt eco-friendly technologies and practices, Governor Atiur Rahman said yesterday.
The money will come in addition to the existing export development fund (EDF) of $1.5 billion and will be named Green EDF, he told a discussion at the office of Policy Research Institute of Bangladesh in Dhaka.
PRI organised the discussion on "access to finance: environmental sustainability in the textile sector" in association with the International Finance Corporation.
Rahman came up with the decision instantly after a number of bankers and economists stressed the need for such a fund for the textile sector.
At present, Bangladesh Bank is offering the EDF to exporters at a rate of LIBOR (London Interbank Offered Rate) plus 2.5 percent for six months. An exporter can borrow a maximum of $15 million in foreign currency.
"The criteria for accessing the fund by the wet processing units, which are also export-oriented or providing supplies to the garment sector, should be considered in view of the overall sustainability of the textile sector," said Ahsan H Mansur, executive director of PRI.
At the seminar, he presented a paper, which he prepared in association with Ifty Islam, managing partner of AT Capital.
Mansur said inefficient resource use and poor environmental practices are major challenges for the textile sector. The textile factories in Dhaka currently consume 1,500 billion litres of groundwater annually to produce five million tonnes of fabric, with every kg of fabric gobbling up 300 litres against the global standard of 100 litres per kg of fabric.
Mansur said making funds available does not guarantee that entrepreneurs would use the resources.
"Education and awareness is important. Besides, customs and supplementary duties should be eliminated for importing cleaner technology equipment and machinery."
The BB governor said the country's garment sector would not be able to reach the $50 billion export target by 2021 without adopting green technologies.
Rahman called for a separate allocation in the budget to promote green financing in the textile sector. "Budgetary allocation makes it possible to provide low-cost funds."
The BB chief said the progress in the textile sector has also brought in multiple challenges in urban expansion, land use, workplace safety and environmental safeguards.
For example, textile dyeing and finishing units in Bangladesh are known to be hugely wasteful in water usage as they consume five times the best practice benchmark.
The toxic discharges of the industry pollute both surface and ground water which has serious consequences for all living beings.
"Long-term sustainability of the industry greatly lies in its ability to produce green textile products mainly due to growing consumer demand for eco-friendly products," the governor said.
Rahman also said a green development policy should be incorporated into the next five-year plan of the country.
Mohammed Abdul Jabbar, managing director of DBL Group, said with an initial investment of $100,000, his company was able to reduce wastage of water, energy, steam, dye and chemical worth $500,000 within a year. "So, it is a matter of mindset. It is not a big deal."
Mustafizur Rahman, executive director of Centre for Policy Dialogue, said environmental sustainability is very important for the country's mid- and long-term development.
"The country will be able to raise its garment exports to $50 billion by 2021 if the factories are eco-friendly."
Ifty Islam said environmental sustainability has become a central point of China's five-year plan although the country is infamous for environmental pollution. "We will have to do the same."
Faruque Hassan, a former vice president of Bangladesh Garment Manu-facturers and Exporters Association, said the factories need financial support from the government and price support from buyers to go for eco-friendly practices.
Abrar Anwar, chief executive officer of Standard Chartered Bangladesh, said financing would not be available for factories if they are not eco-friendly.
Mamun Rashid, chairman of Financial Excellence Ltd, and Mrinal Sircar, programme manager of Bangladesh Water PaCT, also spoke.