Some Tk 4.0 billion fund for remediation of ready-made garment (RMG) factories has been idle following poor demand from the owners due to ‘unfavourable’ interest rate, sources said. They said the country’s RMG entrepreneurs feared getting indebted through borrowing at 9-10 per cent interest rates from the fund that has a cheap foreign-aid component. Only Tk 60 million has been disbursed from the Japan International Cooperation Agency (JICA)-aided fund to date, an apparel-sector leader said on Sunday. The Bangladesh Bank (BB) is yet to start disbursing money from the remediation fund in full swing because of high interest coupled with service charges, levied by the government agencies, said one apparel maker. “We will not take loan from the fund unless the government reduces the existing interest rate and service charges. We will be affected, if we take the loan from the fund at 9.0 per cent interest through banks,” he added. The Ministry of Finance (MoF) and BB are supposed to take 4.0 per cent and 1.0 per cent as service charges respectively, and the rest goes to the commercial banks. According to the ministry officials, MoF gets the fund from JICA at 0.01 per cent rate, and passes it on to BB at 4.0 per cent. The central bank provides the fund at 5.0 per cent to the banks that at last lend the money at 9.0 per cent to the garment owners. JICA has provided a soft loan of Tk 1.0 billion ($13 million) at 0.01 per cent interest for the fund. Besides, some Tk 3.0 billion more from the public exchequer has been deposited with the fund. The JICA money is supposed to be spent for repairing and improving RMG units in metropolitan areas of Dhaka and Chittagong. These will be done under the ongoing process of upgrading the industry amid insistence from western consumer nations and stakeholders following some fatal accidents. Earlier this month, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) demanded cut in the interest rate and services charges to 4-5 per cent, all inclusive. A senior official of MoF, who is involved with the matter, said: “We are working on reducing the service charge, taken by the government, to 1-2 per cent from the earlier-fixed 4.0 per cent. In this connection, we sat with BGMEA and stakeholders earlier this month.” Currently, fund amounting to around $200 million is available for remediation purpose of the RMG factories. Of the amount, IFC is providing $50 million and USAID is giving a guarantee fund of $22 million. AFD (French Development Agency) will also be providing funds worth €50 million by mid-2016. All these funds are provided at 0.01 to 1.0 per cent interest rates. After the Rana Plaza collapse in 2013, the government, manufacturers, buyers, and development partners took the initiative of improving workplace safety and ensuring workers’ security in local RMG sector.
