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Bangladesh Central Bank Creates Fund to Support Green Textile Factories

The Central Bank of Bangladesh has allocated $500 million to a low-cost fund to aid factories working to adopt eco-friendly technologies and practices. The Central Bank requires all financial institutions in the country to designate at least 5 percent of their lending to this fund.

Bangladesh is home to the world’s second largest textile industry, in which washing, dyeing and finishing (WDF) activities are a major component, totaling roughly 1,700 factories. However, WDF facilities are the second biggest polluter in the country, and consume 1,500 billion liters of groundwater per year. Several mills use 250 to 300 liters of water per kilogram of fabric, while the global best use 50 liters per kilogram or less.

This announcement, made by the governor of Bangladesh Bank Atiur Rahman, follows suggestions made at a seminar held by the World Bank Group’s Trade and Competitiveness Global Practice and the Policy Research Institute of Bangladesh (PRI). The seminar is a part of the Partnership for Cleaner Textile (PaCT) project, which works to eliminate the environmental and social impact of the textile industry. These harmful practices include groundwater extraction, surface water pollution and the misuse of energy and chemical resources in textile wet processing.

Three interim working groups, jointly led by PRI, were created in May 2014 to discuss finance issues and other industry-related problems. These group members proposed recommendations on finance issues to the Central Bank governor in February. As a result, the fund was announced and The World Bank’s member, the International Finance Corporation (IFC) was asked to structure the fund.

The Central Bank’s chief noted that the fund’s timing is very important as the global demand for environmentally friendly products and practices continues to rise.

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