Country’s apparel makers want the government to provide funds/loans at 3.0 per cent interest rate instead of 9-10 per cent from the foreign remediation fund for ready-made garment (RMG) factories, sources said. Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has recently proposed to the ministry of finance (MoF) to take necessary steps in this connection, they added. According to the BGMEA proposal, the Bangladesh Bank (BB), Bank and Financial Institutions Division (BFID) and the commercial banks concerned should charge 0.5 per cent, 0.5 per cent and 2.0 per cent respectively, they also mentioned. Currently, some Tk 4.0 billion fund for remediation of RMG factories has remained idle following poor demand from the RMG owners due to ‘unfavourable’ interest rate, industry insiders said. They said the country’s RMG entrepreneurs feared that they would get indebted if they borrow money at 9-10 per cent interest rate from the fund that has been received at a much cheaper rate. The BB is yet to start disbursing money from the remediation fund in full swing because of high interest rate 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 garment factory owners are facing tough times in carrying out remediation work at their respective units, he also said. 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 4.0-5.0 per cent to the scheduled banks that at last lend the money at 9.0 per cent to the garment owners. The MoF and BB are supposed to take 4.0 per cent and 1.0 per cent as service charges respectively, and the rest should be taken by the commercial banks. 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. Bangladesh Garment Manufacturers and Exporters Association (BGMEA) repeatedly demanded cut in the interest rate and service charges to 3-5 per cent, all inclusive. A senior official of MoF, who is involved with the matter, said: “We are working on reducing the service charge from the 4.0 per cent fixed earlier. In this connection, we had sat with BGMEA and stakeholders earlier.” Currently, a 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 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. When contacted to speak on the issue, President of BGMEA Md Siddiqur Rahman told the FE on Wednesday: “We hope that we will find a reasonable solution about the service charge of foreign remediation fund as we are going to sit with the MoF in this connection shortly”. After the Rana Plaza collapse in 2013, the government, manufacturers, buyers, and development partners took the initiatives of improving workplace safety and ensuring workers’ security in local RMG sector.
