IFC provides liquidity succour to Covid-hit RMG sector

To help Bangladesh’s export-oriented ready-made garment (RMG) industry offset the Covid-induced losses, the International Finance Corporation (IFC) has now stepped in, reports UNB.

To start with, the sister organisation of the World Bank has invested $22.7 million in Hamza Textiles Limited (HTL), a dyeing and finishing company owned by the Dulal Brothers Ltd (DBL) Group.

The investment marks IFC’s first Covid-19 support in the RMG sector and includes financing from the International Development Association’s Private Sector Window (IDA-PSW), set up to catalyse investment in low-income and fragile countries.

According to the IFC, the financing will help the company build a new factory with advanced and resource-efficient technologies to respond to evolving demands of consumers and create more than 900 direct new jobs.

“The new factory will allow Hamza to work with new fabrics to meet increasing buyer requirements, widen its manufacturing base and highlight the effectiveness of advanced technologies to cut production costs and deliver climate benefits,” said MA Jabbar, DBL's managing director.

The expanded operation is also expected to contribute $8 million to Bangladesh's economy directly and indirectly through local supply chains by 2028, $15 million in expected economic activities generated by additional income of employees, and boost opportunities for micro, small, and medium enterprises along the supply chain.

HTL provides dyeing and finishing services for fabrics that are used in making RMG by its sister companies, owned by the DBL Group, which is one of Bangladesh’s largest integrated knitted apparel manufacturers and exporters.

IFC’s investment will help expand HTL’s finishing capacity by 80 tonnes per day to reach a total capacity of 103 tonnes per day at its new factory, which will also be a Leadership in Energy and Environmental Design (LEED) certified green building.

"Bangladesh’s RMG industry is vital for the country’s economy and delivering on its ambitions to transform into an upper middle-income country.

"To remain competitive, the industry needs to evolve to higher value-added products and adopt modern technologies, which are even more critical given the impact of Covid-19,” said Hector Gomez Ang, IFC’s regional director for South Asia.

“Even prior to the pandemic, the industry was beginning to stagnate in terms of innovation and value addition. We hope this investment will serve as a demonstration model for others to move upmarket and remain competitive.”

IFC has been a strong supporter and financier to the critical RMG sector, which contributes to more than four-fifths of its export earnings, and which alone has created more than four million jobs, employing mostly women.

However, about 85 per cent of exports in Bangladesh come from only low-value RMG products. Investments in production and process technologies will allow the sector to enhance value addition and make progress in advanced manufacturing processes, which will help the sector withstand future shocks to the economy and protect export growth.

To date, IFC has invested in five RMG manufacturers in Bangladesh and has provided more than $90 million, largely in the form of debt financing.

The latest investment marks IFC’s second engagement with the DBL Group. In 2013, IFC also provided $10.5 million to Color City Limited, another of the Group's dyeing and finishing companies.

Since 2010, IFC’s advisory services have been engaged with HTL and several other DBL Group companies on various programmes on resource efficiency, women empowerment and climate resilience, including in the IFC-led Partnership for Cleaner Textiles (PaCT) programme that improves water and resource efficiency.

Hamza Textiles will be joining the Better Work programme and will also avail IFC’s corporate governance advisory services.

The family run DBL Group, comprising 28 companies, started operations in the RMG sector in 1991 and has interests in other industries such as ceramic tiles production, dredging, telecommunications, and semiconductors.