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Bangladesh to seek GCF funding to green textile sector

  • Published at 09:42 pm May 29th, 2019
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The Infrastructure Development Company Limited (Idcol), will be seeking $100 million in loans from the GCF, and hopes to secure a further $66 million through borrower co-financing

Bangladesh is looking to secure $166 million in financing to improve energy efficiency in the textile sector, with some one hundred million dollars being sought from the Green Climate Fund (GCF).  

The Infrastructure Development Company Limited (Idcol), one of two local direct access accredited entities empowered to handle GCF monies, will be seeking $100 million in loans from the GCF, and hopes to secure a further $66 million through borrower co-financing.   

Improving energy efficiency in Bangladesh’s textiles industry is considered key to retaining global competitiveness.

“Bangladesh is going to graduate from LDC status which means that business as usual for the textile sector will no longer work. We need to clean up our act,” explained Saleemul Huq, director of the International Centre for Climate Change and Development (ICCCAD), an implementing partner.

Stakeholders exchanged views at a city hotel on Wednesday at a workshop on energy efficiency in the textile sector and its influence on the environment, society and gender, organised by Idcol with support from implementing partners EY and ICCCAD.

Mahmood Malik, executive director and CEO of Idcol, explained the benefits of GCF financing, saying: “The concessionality considered in this program will be targeted at overcoming short-term risk or cost barriers faced by the textile companies. The concessionality in the form of appropriate tenors, interest rates, and grace periods offered by GCF will be passed on to the end borrowers.”

“We’ve taken a very aggressive approach. This is probably one of the fastest proposals to the GCF,” EY associate partner Ashish Kulkarni said. Suraj Pandey, a GCF expert at EY, led the stakeholder discussion at the event.

Idcol's GCF unit manager Mafruda Rahman explained that blended funding – mixing low interest GCF funds with financing available in the markets – effectively produces single-digit interest rates. The funds being sought will have a 5-year disbursement period and a 10-year repayment period with a two-year grace period.

Idcol, a non-bank financial institution working in the medium to large-scale infrastructure and renewable energy financing space, is accredited by the GCF to handle loans of up to $250 million. The company includes both senior government officials and three private sector representatives on its board.

Textiles manufacturers have already begun cleaning and greening their operations. 

Hasan Mahmud, executive director at Bitopi Group which has two LEED certified factories, explained the business case for embracing energy efficiency: “We run business cases - we put it on paper and look at the payback period. It makes sense when we are getting our money back.”

Fakhrul Alam, sales and marketing manager at Noman Terry Towel Mills Limited, added: “I want to make the environment cleaner for my children. It isn’t always about the money.”

The UNDP’s Arif Faisal, programme specialist on environmental sustainability and energy, advocated a paradigm shift from a linear to a circular economy.

“Very visible solar panels on factory roofs are good. But if the same factory is dumping effluents into the river, that is not so good,” he said.

Mizan Khan, programme director of the LDC University Consortium on Climate Change at ICCCAD, agreed: “There is a lacuna in the conceptualisation of this issue and that is the significance of behavioural change as a part of energy efficiency.”

Special guest Mallick Anwar Hossain, additional director general of the department of the environment said: “I request industrialists to introduce innovative technology to make their industry clean and green.”  

Abdullah Al Mamun, vice president of the |Bangladesh Textile Mills Association, responded: “We have accepted the challenge of making our country cleaner, greener and more efficient.”

Md Helal Uddin, additional secretary of the Sustainable and Renewable Energy Development Authority, attended the workshop as chief guest.

The proposal to the GCF will likely be submitted by September this year. If it is approved, Idcol will be authorised to identify local recipients of funding.

There are currently three approved GCF funded projects in Bangladesh.