Three RMG units get $1.3m IFC-VF fund

Local apparel manufacturers have started getting financial support from the IFC-VF Corporation for addressing fire, electrical and structural flaws of inspected readymade garment (RMG) units.
Under a joint remediation support, the IFC and the VF disbursed the first round of its financing to three Bangladeshi factories for safety improvements, mainly to promote workers' safety.
Earlier in September, the VF Corporation, an American apparel giant, teamed up with the International Finance Corporation (IFC) to provide US$10 million for financing fire and building safety improvements in the readymade garment (RMG) sector of Bangladesh.
"Three factories-- Arunima Sportswear Ltd, Olio Apparels Ltd and Radisson Apparel Ltd -- that produce products for the VF, got $1.3 million  financial support for fixing the safety concerns," Vice President of VF Global Product Procurement Thomas A Nelson told the FE.
"This initiative helps the VF suppliers in Bangladesh overcome financial obstacles to improvement of workplace safety conditions," Mr Nelson, who is attending the three-day 'Dhaka Apparel Summit', added.
Through the financing arrangement, the VF provides a full corporate guarantee for up to $10 million that the IFC and its partner BRAC Bank lend to the VF's contract suppliers. The VF's guarantee to back the loans makes it possible for the IFC to lend at lower interest rates, a statement issued by the VF said on Monday.
Quoting its President of Supply Chain Tom Glaser, the statement added, "Providing these loans to help supplier factories fund the necessary improvements is another positive step forward in the VF's efforts to ensure the safety of the people making our products in Bangladesh."
The financing facility of the VF and the IFC helps enable factory owners to meet the stringent standards set forth by the Alliance for Bangladesh Worker Safety (Alliance), an industry group of international apparel manufacturers and buyers whose work includes inspection of Bangladeshi garment factories and development of corrective action plans for meeting acceptable standards. The VF is one of 26 Alliance members.
 "These owners will use the capital to invest in safety upgrades such as installation of fire sprinklers, fire doors and detection systems, along with other necessary repairs and safety precautions," the statement added.
"The apparel industry has provided employment and reduced poverty for millions of people in Bangladesh. This financing model, which we think could work well for other buyers and suppliers, will help improve working conditions and facilitate growth and development," said Sergio Pimenta, IFC Director for Manufacturing, Agribusiness and Services.
The VF and the IFC are granting loans to the former's supplier factories in the range of $100,000 to $1 million. The lending programme is a part of the VF's efforts to help suppliers achieve performance standards for assessing and managing environmental and social risks and impacts and labour and working conditions.
Welcoming the move, Syed Abed Hossain, managing director of Arunima Sportswear Ltd said it would help his unit to fix the safety issues.
"The loan at single digit-4.7 per cent-- is a great support for us as the interest rates of loan provided by the local commercial banks are very high ranging between 16 per cent and 22 per cent," he said adding that he has to repay the loan in three years of its duration.
    munni_fe@yahoo.com