DBS collaborates with Inditex to launch organic cotton procurement financing programme

A pilot organic cotton procurement financing programme will be launched by DBS bank in partnership with Zara’s owner Inditex which will disburse payment to over 2,000 farmers in India. The partnership aims at upscaling India’s organic cotton industry and will support the network of local Farmer Producer Organisations (FPOs) in reaching the farmers present in the fashion retailer’s supply chain in order to evaluate their financing needs.

Globally, India is the largest producer of cotton and has the greatest land area usage for cotton cultivation but still, around 2% of the total cotton production in the country is organic cotton. For procuring organic cotton from the farmers and providing them greater visibility of their cash flow, DBS will arrange financing for the FPOs under the pilot. This will help them to grow their sustainable farming operations and plan their business needs in a better way.

Arvind Sharma DBS’ head of priority sector lending said that to build priority sector lending business, this pilot programme forms an integral part of DBS India’s larger plan. He added that under-banked sectors which are considered important for the overall development of the economy by (India’s central bank) the Reserve Bank of India are covered under the priority sectors like small businesses, agriculture, education, affordable housing, and renewable energy.

Another aim of the programme is to provide transparency by eliminating the middleman in the supply chain to ensure whether the organic cotton has been farmed and processed in a sustainable manner or not. It also enables Inditex and cotton spinners in its ecosystem combined with other tracking mechanisms, to trace directly the source of the cotton and to make sure it has been farmed sustainably. It will also ensure that a higher premium for their organically harvested produce is secured by them.

Terence Yong DBS’ group head of western multinational corporations said that the global cotton industry poses an opportunity to invest for a positive impact which has a growing focus on climate risks and social inequality. He added that their clients globally through their business decisions are looking for ways to add societal and environmental value. And to enhance transparency and traceability of transactions made, many of them are taking the leap to digitize their supply chains.

By 2024, DBS has also committed to finance $50 billion in green projects,  renewable, and clean-energy which will be double more than its earlier target of $20 billion to increase its support for businesses seeking to achieve their sustainability ambitions.