Soft loans give Bangladesh RMG factory owners a hard time

RMG-factory

The readymade garment factory owners in Bangladesh are having a hard time getting sufficient loans for remediation work at their factories.

Even the soft loans they do get from the Japan International Cooperation Agency (Jica), they are unable to make the most of it because they have to take it at 9 to 10 per cent from the market, whereas it is actually being given by Jica at 0.01 per cent.

Out of this 10 per cent, the Finance Ministry and Bangladesh Bank are making a profit of 5 per cent, while the remaining goes to commercial banks.

At present, around $200m in funds are available for remediation purpose of garment factories. Out of this, IFC is providing $50m, the USAID is giving a guarantee fund of $22m and Jica $13m. Europe-based AFD will also be providing funds of €50 million by mid-2016. All these funds are provided at a rate of 0.01 to 1 per cent.

However, the factory owners, who are the ultimate clients, have to take the loan at 10 per cent.

Reportedly, US, UK, Netherlands, Canada and the European Union aren’t happy about this. According to sources, ambassadors of these countries had met the secretaries of Foreign, Commerce, and Labour Ministries, questioning them on why the rate was so high for the ultimate consumers, when they were providing the soft loan to help the Bangladeshi industry become competitive.

While the government reportedly placed the blame squarely on the established legal barriers like exchange rate fluctuation and bank rates for providing the soft loan at a high rate, the envoys expressed their total displeasure over the Bangladeshi bureaucracy’s alleged wrongful interest in this whole affair.

The finance ministry gets the fund at less than 1 per cent and transfers it to The Bangladesh Bank at 4 per cent, reports said. The central bank then provides the fund at 5 per cent to commercial banks that ultimately lends it for 9 to 10 per cent to the factory owners.

 
[SOURCE :-apparelresources]