Promoting financing of sustainable production in the textile sector

With over four million employees, the textile industry in Bangladesh accounts for over 80 per cent of the national exports, and continues to constitute an important pillar of the country's economic development. However, five years after Rana Plaza, compliance with environmental and occupational safety standards remains an important challenge across the industry. Poor safety standards threaten the health of workers and result in social conflicts between employers and employees. Moreover, non-compliance with environmental standards leads to water resources being over-exploited and polluted. As a consequence, the country's environmental problems and energy scarcity will be aggravated and the sector's long-term growth opportunities impaired.

Joint efforts by governments, industry associations, international buyers, development partners and industry could have already contributed to raising awareness among relevant stakeholders. In addition, sector initiatives have been introduced and national authorities trained to oversee the compliance with safety and environmental standards. However, these efforts so far have not been able to change the investment climate in textile factories. This is based on the fact that companies' experience in conducting profitability assessments as well as their business knowledge regarding the benefits and risks of such investments are limited. Furthermore, a general lack of information about existing standards and limited access of textile factories to adequate financing services and institutes further hampers investments. The Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) wants to change these conditions.

adelphi supported GIZ and their partners in developing tailor-made "green" financial products, which companies in the textile sector can now use to invest in occupational safety and environmental measures, and therefore contributes to improving framework conditions. Accompanying measures aim at sensitizing, training and marketing financial products in the textile sector as well as contributing to a positive "green" investment climate within the private financial sector in Bangladesh. This project was implemented in close cooperation with Bangladesh's central bank and the development banks KfW and AFD.