Central Bank of Bangladesh to set up US$500 mn textile green fund

With an aim to bring benefit to the country’s vertically integrated knitting mills that operate their own dyeing and finishing facilities, the Central Bank of Bangladesh will create a US$500 million Green Fund for the textile sector. Textile processing like washing, dyeing, and finishing (WDF) are the key pillar of the country’s economy. The country has 1,700 WDF units and 200,000 workers contribute a net value added of up to 20 per cent to the textile value chain. The entire textile industry generated around US$24 billion in 2014 and employ 4 million workers, of which, 80 per cent are women.

Despite earning good margins, WDF units are the second largest polluter, consuming 1,500 billion litres of groundwater a year and relying on inadequate wastewater treatment. Many mills use 250 to 300 litres of water per kilogram of fabric, far beyond the global best practice of 50 litres per kilogram or less.

According to the Governor of Bangladesh Bank, Atiur Rahman, the central bank’s plans to earmark US$500 million of low-cost “green fund” for textile factories, including knitting mills. The fund will To help the sector adopt eco-friendly technologies and practices. The announcement follows the recommendations made at a seminar jointly organized by the World Bank Group’s Trade and Competitiveness Global Practice and the Policy Research Institute of Bangladesh (PRI). The seminar is a part of the Partnership for Cleaner Textile (PaCT) project.

PaCT aims to eliminate the harmful environmental and social impact of groundwater extraction, surface water pollution, and misuse of energy and chemical resources in textile wet processing to support the sector’s long-term competitiveness. The Bank Group’s Trade and Competitiveness Global Practice led stakeholder engagements with national and sector-level stakeholders to address water sustainability challenges.

At least six major policy recommendations on finance issues were proposed by working group members to the central bank governor on 14 February 2015. As a result, US$500 million for resource efficiency financing in textile sector was announced by the governor. IFC was requested to take a lead role in structuring the fund. In addition, all financial institutions in Bangladesh must allocate at least 5 percent of their lending to green finance by 2016.