Bangladesh Bank (BB) has relaxed the eligibility criteria for Participating Financial Institutions (PFIs) under the Japan International Cooperation Agency (JICA)-assisted Urban Building Safety Project (UBSP). The move aims to expedite financing for factory safety improvements in Bangladesh's readymade garment (RMG) sector. The central bank issued a circular revising the Operating Guidelines of the Urban Building Safety Project (BD-P84) under Component-1.
Revised NPL Criteria
According to the circular, Clause 4.1(6) of the project guidelines has been replaced with a new eligibility criterion requiring participating financial institutions to maintain a non-performing loan (NPL) ratio not exceeding 20 percent. This amendment is intended to ensure the smooth implementation of the project by expanding the pool of eligible financial institutions capable of channeling funds for building safety upgrades.
Objective and Implementation
Officials said the revised criterion is intended to facilitate faster credit disbursement for factory remediation and safety enhancement initiatives, helping improve workplace safety standards in the country's export-oriented garment industry. The project is being implemented by Bangladesh Bank's SME & Special Programmes Department (SMESPD) in coordination with the JICA Project Implementation Unit (PIU).
Immediate Effect and Unchanged Provisions
Bangladesh Bank directed the Managing Directors and Chief Executive Officers of all participating financial institutions to incorporate the revised provision into their operational procedures with immediate effect. The central bank also clarified that all other provisions of the Operating Guidelines will remain unchanged.
Significance for the RMG Sector
This revision is significant for the RMG sector, which is a crucial part of Bangladesh's economy. By easing the NPL criteria, more financial institutions can participate in the project, leading to quicker funding and implementation of safety measures. This, in turn, is expected to enhance workplace safety, reduce accidents, and improve the overall working conditions in garment factories.
