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IFC invests $22.7m in RMG factory

The fund will help build a new factory with advanced and resource-efficient technologies and create more than 900

IFC invests $22.7m in RMG factory

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International Finance Corporation (IFC) has invested $22.7 million in Hamza Textiles Limited (HTL), a dyeing and finishing company of DBL Group.

The investment aims to improve competitiveness of Bangladesh’s ready-made garment (RMG) sector in the global market.

The financing will help build a new factory with advanced and resource-efficient technologies to respond to evolving demands of consumers and create more than 900 direct new jobs.

The new investment marks IFC’s first COVID-19 support in the RMG sector and includes financing from the International Development Association’s Private Sector Window (IDA-PSW).

IDA-PSW is set up to catalyze investment in low-income and fragile countries, said the IFC in Dhaka on Tuesday.

“The new factory will allow Hamza to work with new fabrics to meet increasing buyer requirements, widen its manufacturing base and highlight the effectiveness of advanced technologies to cut production costs and deliver climate benefits,” said MA Jabbar, managing director of Dulal Brothers Ltd. (DBL) Group.

The expanded operation is also expected to contribute $8 million to the country’s economy directly and indirectly through local supply chains by 2028.

This will also bring $15 million in expected economic activities generated by additional income of employees, and boost opportunities for micro, small, and medium enterprises along the supply chain.

HTL provides dyeing and finishing services for fabrics that are used in making RMG by its sister companies owned by the DBL Group.

DBL is one of Bangladesh’s largest integrated knitted apparel manufacturers and exporters.

IFC’s investment will help expand HTL’s finishing capacity by 80 tons per day to reach a total capacity of 103 tons per day at its new factory, which will also be a Leadership in Energy and Environmental Design (LEED) certified green building.

“Bangladesh’s ready-made garment industry is vital for the country’s economy and delivering on its ambitions to transform into an upper middle-income country,” said Hector Gomez Ang, IFC’s regional director for South Asia.

“To remain competitive, the industry needs to evolve to higher value-added products and adopt modern technologies, which are even more critical given the impact of COVID-19,” said the director.

“Even prior to the pandemic, the industry was beginning to stagnate in terms of innovation and value addition.”

“We hope this investment will serve as a demonstration model for others to move upmarket and remain competitive,” said Hector Gomez Ang.

IFC has been a strong supporter and financier to the critical RMG sector, which contributes to more than four-fifths of its export earnings, and which alone has created more than 4 million jobs, employing mostly women.

However, about 85 percent of exports in Bangladesh come from only low-value RMG products.

Investments in production and process technologies will allow the sector to enhance value addition and make progress in advanced manufacturing processes.

This will help the sector withstand future shocks to the economy and protect export growth.

To date, IFC has invested in five RMG manufacturers in Bangladesh and has provided more than $90 million, largely in the form of debt financing.

The latest investment marks IFC’s second engagement with DBL Group.

In 2013, IFC also provided $10.5 million to Color City Limited, another of the Group's dyeing and finishing companies.

Since 2010, IFC’s advisory services have been engaged with HTL and several other DBL Group companies on various programmes.

The programmes are related to resource efficiency, women empowerment and climate resilience, including in the IFC-led Partnership for Cleaner Textiles (PaCT) programme that improves water and resource efficiency and the Gender Equality and Returns (GEAR) programme.

This is under the Better Work initiative in partnership with the International Labour Organization (ILO), that supports upskilling workers, labor conditions and worker safety.

Hamza Textiles will be joining the Better Work programme and will also avail IFC’s corporate governance advisory services.

The family-run DBL Group, comprising 28 companies, started operations in the RMG sector in 1991.

It has interests in other industries including ceramic tiles manufacturing, dredging, telecommunications, and manufacturing of semiconductors.

IFC—a member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets.