VF Corp., the parent of The North Face, Vans and Timberland, and IFC, a member of the World Bank Group, announced they have provided loans to three Bangladeshi garment factories under a new program for funding fire and building safety improvements.
Through the financing arrangement, VF provides a full corporate guarantee for up to $10 million that the IFC and its partner BRAC Bank lend to VFs contract suppliers. VFs guarantee to back the loans makes it possible for IFC to lend at lower interest rates. This initiative helps VF suppliers in Bangladesh overcome financial obstacles to improving workplace safety conditions.
Providing these loans to help supplier factories fund the necessary improvements is another positive step forward in VFs efforts to ensure the safety of the people making our products in Bangladesh, said Tom Glaser, VFs president of supply chain.
The financing structure from VF and IFC helps enable factory owners meet the stringent standards set forth by the Alliance for Bangladesh Worker Safety (Alliance), an industry group of international apparel manufacturers and buyers whose work includes the inspection of Bangladeshi garment factories and development of corrective action plans for meeting acceptable standards. VF is one of 26 Alliance members.
IFC disbursed an initial set of loan payments, totaling $1.3 million, to three factory owners: Arunima Sportswear Ltd.; Olio Apparels Ltd.; and, Radisson Apparel Ltd. These owners will use the capital to invest in safety upgrades such as the installation of fire sprinklers, fire doors and detection systems, along with other necessary repairs and safety precautions.
The apparel industry has provided employment and reduced poverty for millions of people in Bangladesh. This financing model, which we think could work well for other buyers and suppliers, will help improve work conditions and facilitate growth and development, said Sergio Pimenta, IFC Director for Manufacturing, Agribusiness and Services.
VF and IFC are granting loans to VFs supplier factories in the range of $100,000 to $1 million. The lending program is part of VFs efforts to help suppliers achieve performance standards for assessing and managing environmental and social risks and impacts, and labor and working conditions.