The International Finance Corporation, a member of the World Bank Group, has announced a programme to make Bangladesh's garment industry safer for workers, providing $50 million to five local banks and forming partnerships with leading international buyers.
This is IFC's first deployment of long-term financing to Bangladeshi banks, according to a statement. The initiative comes as many factories have found it difficult to access the capital needed to make the improvements necessary to meet buyers' standards.
The IFC fund is separate from the WB's $300 million low-cost loans announced last month for private sector firms, including those from garment, footwear and light engineering sectors.
Prime Bank has already signed up to the IFC initiative, and four other banks are expected to follow in the coming weeks.
Under the programme, the IFC will provide $10 million each in financing to the five banks which will allow participating banks to increase lending to garment factories specifically to improve their structural, electrical and fire safety infrastructure.
The IFC signed separate cooperation agreements with the Alliance for Bangladesh Worker Safety, and the Accord on Fire Safety and Building Safety in Bangladesh which represent dozens of the world's leading garment brands.
The two organisations will assist garment factories to undertake the safety upgrades and monitor compliance.
Accord and Alliance were formed after the Rana Plaza building collapse in April 2013 by retailers and brands from Europe and North America to inspect structural, electrical and fire safety standards in the garment sector.
IFC CEO Jin-Yong Cai said banks, international buyers and manufacturers have a shared interest in this issue because it is indispensable to making Bangladeshi garment factories more competitive and sustainable.
Both Alliance and Accord will each contribute $250,000 to support the implementation of the programme, the IFC said in the statement.
Besides, together with the IFC, Accord and Alliance have both provided training to participating banks on the factory remediation process and understanding the resulting corrective action plans, and they are monitoring factory progress on compliance against these plans.
Ellen Tauscher, independent chair of Alliance, said providing long-term loans to factory owners to undertake and implement remediation is an ongoing effort and the joint initiative will allow for a wider group of factory owners to have access to financing.
Rob Wayss, executive director of Accord, said the IFC remediation financing programme is an important contribution to the Accord's ongoing efforts to ensure necessary remediation at inspected factories and meets an express request of the local industry.
“Accord is pleased to be working with the IFC in supporting factories, particularly the smaller and medium sized ones, who are in need of this type of affordable long-term financing” Wayss also said.
Bangladesh Garment Manufacturers and Exporters Association in a statement welcomed the IFC initiative, saying it will reduce both their remediation costs and risks.