WASHINGTON — The Alliance for Bangladesh Worker Safety said it has reached a breakthrough in providing affordable financing to hundreds of its garment factories in Bangladesh that are undergoing extensive remediation to comply with new fire, building and electrical standards.
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“Our goal is to create a credit facility of $20 million to $35 million via five local banks,” the Alliance said in an 18-month progress report released Monday.
The Alliance, which includes Wal-Mart Stores Inc., Gap Inc., VF Corp. and Target Corp., said it will work in partnership with international finance institutions to provide financing to Alliance factories through the new credit facility. To “encourage” the banks to provide loans to member factories, the Alliance said it will provide technical assistance to the financing organizations on remediation progress and cover administrative and start-up costs and up to $2 million in a “first-loss guarantee.”
“Although this facility is still in the start-up phase, it represents an important breakthrough in providing access to affordable financing,” the Alliance said.
The proposed financing comes at a pivotal time for the group, one of two industry initiatives launched in the aftermath of two factory tragedies that claimed the lives of more than 1,240 people and cast a global spotlight on Bangladesh’s garment industry. Remediation of the factories and training is a massive undertaking. One official at the Bangladesh Garment Manufacturers and Exporters Association put the price tag of remediation at about $3 billion for about 1,000 factories that will be required to relocate.
In its updated progress report on Monday, the Alliance said it has nearly tripled its staff to address remediation challenges and efforts in Bangladesh after completing the inspection of 587 factories used by its member companies in July.
The Alliance said four of its members have launched their own supplier financing arrangements, while low-cost remediation loans have been issued to an initial group of suppliers. Suppliers not covered by bilateral financing programs will have access to the new credit facility that was announced.
On the remediation front, the Alliance said it has conducted more than 100 verification visits to factories and approved nearly 300 corrective action plans to the factories where its members source. It also said 10 percent of the factories will undergo final inspections by July 9 and expects to complete 100 percent of final inspections by July 2017.
To date, the Alliance has brought 19 “immediate risk” cases to a Bangladesh government-established review panel that determines whether a factory should be closed or continue operating under reduced capacity. The panel has fully closed five of those factories, partially closed 12 factories and allowed two to operate with reduced loads. It has also trained more than 1.2 million workers for fire safety, and it will review training for new and existing workers with a target date of rolling out new review training programs by July. Security guard training is also slated to be completed by July.
The alliance also said it expects 100 percent of all factories to be trained on a worker help line, where workers report problems and imminent risks, by July 2016. To date, more than 500,000 workers in more than 300 factories have access to the help line.
Another commitment involves teaming in a project with the ILO to pilot Occupational Safety and Health Committees in 10 factories by June.
Ellen Tauscher, independent chair of the Alliance, said despite the progress, “The Alliance is concerned that our efforts have been slowed during the current violence, turmoil and uncertainty in Bangladesh. We call upon all parties who are committed to a vibrant and successful Bangladesh to resolve differences through dialogue rather than violence….We are committed to meeting our ambitious goals and will continue to do our part to protect workers, upgrade factories and help build a sustainable and safe ready-made garment sector.”