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Apparel Retailers Finance Bangladesh Safety Loans

An alliance of international apparel retailers will provide millions of dollars to help Bangladesh factories implement necessary safety upgrades.

An alliance of international apparel retailers will provide millions of dollars to help Bangladesh factories implement necessary safety upgrades. The money will help factory owners secure loans at lower interest rates to add in required features like fire doors, safety lights and automatic-sprinkler systems. The Alliance for Bangladesh Worker Safety – which counts Wal-Mart, Gap and Target among its 26 members – reached an agreement with the International Finance Corporation, the World Bank group’s private-sector arm that will finance the loans.

VF Corporation, a member of the Alliance and parent company of brands like Wrangler, The North Face and others, announced Monday it had provided loans to three Bangladesh factories with a full corporate guarantee for up to $10 million. “Providing these loans to help supplier factories fund the necessary improvements is another positive step forward in VF’s efforts to ensure the safety of the people making our products in Bangladesh,” said Tom Glaser, VF’s president of supply chain.

One of those factories, Arunima Sportswear, received approval for a $900,000 loan at a 5% interest rate – less than one-third the rate the factory could have gotten from local providers. Owner Syed Kamrul Huda told The Wall Street Journal he wouldn’t have been able to otherwise afford the upfront costs for the safety requirements. “[Raising money] to comply with the new inspection regime has become a major headache,” he said.

It is estimated that it will require about $400 million to upgrade the country’s 2,000 apparel factories to make them safe for workers. A series of accidents in Bangladesh – including the collapse of the Rana Plaza building 18 months ago, which cost the lives of 1,110 factory workers – has prompted an international effort to improve the working conditions of apparel factory employees. According to the World Trade Organization, Bangladesh is the third-largest apparel exporter in the world.