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Innovative business models for Bangladeshi SME textile factories

ISC and ERI jointly present unified framework

The Institute for Sustainable Communities (ISC) in collaboration with Engineering Resources International (ERI) Ltd. organized a webinar titled ‘Clean Technology Adoption for Textile Sector in Bangladesh: Opportunities and Solutions to Addressing Barriers’ through Innovative Business Models’ on September 28, 2020.

Innovative-business-models-Bangladeshi-SME-textile-factories
Figure 1: ISC and ERI jointly present a unified framework that will aid SME textile factories.

The textile industry is the pillar of Bangladesh’s economy and its sustained growth will play an important role in the economic recovery of a country. For sustained growth of the textile sector, the availability of sustainable and affordable energy is critical. Energy efficiency and renewable energy is the most promising way to improve energy security, bring down the cost of production, and remain competitive in the global markets.

ISC with support from USAID has implemented a project to improve the energy efficiency performance of the Tirupur textile cluster in India. To enable knowledge exchange between India and Bangladesh, a study was conducted in Bangladesh to identify the barriers and opportunities to the adoption of energy efficiency and renewable energy technologies by the textile sector.

Dr. Zahid Hassan, Director, ERI presented the framework.

He said, “Right now, in the industry, there are financial institutions, technology suppliers, and SME’s; which are operating under some regulatory bodies. Factories get financing from financial institutions and buy equipment from technology suppliers.”

A national Central Unit under the proposed framework will develop business cases for SME’s and the central unit with the aid of a national energy service company (ESCO) will greatly help SMEs and textile factories in various ways.

For example, the Central Unit will take demand aggregation from SME’s – like a factory ordered 200 motors but 500 factories will order 100000 motors individually. Whereas the central unit will take all the demands and a combined order means the price is significantly reduced and pass these analytics to factories, he said.

Once the manufacturer installs the equipment in factories without any cost, ESCO will do the baseline work and monitor the savings the equipment’ has done. After a certain period – for three months or more depending on the term of the agreement – SMEs will pay back through Central Unit to the manufacturer as per the saving percentage, added Zahid.

And after the full payment is done in a certain period, the textile factory owns the equipment. Greatly easing the burden from SME’s.

With this work plan, factories at first need to come up with their assessment to ESCO. Which ESCO conveys to the Central Unit, and it will acquire the at a much lower price as discussed above, thus, reducing cost for factories.

ERI-ISC-Proposed-framework
Figure 2: Proposed framework summary.

The Central Unit can also act as a collector of climate funds through foreign entities or the Bangladesh bank and give it to SME’s. In addition to that, leading institutions like BGMEA, BKMEA can support small and financially weak institutions to help them recover.

SME textile factories can choose either way and get leverage through this proposal.

In case an SME fails to pay back the loan, the Central Unit can still pay the manufacturer from the fees it will get from SME’s.

“Overall, bringing all parties together under the Central Unit, there will be a knowledge hub, under which all activities and development will be published. This can be subscription, advertisement based to generate a portion of income,” he stressed.

As for utilizing the mid-level workforce through training, the Central Unit will generate a pull of skilled workers.

Also, by seeing the performance data of SME’s, the brands can play a major role in the central unit with improve performance activities in supply chain units.

Overall, textile factories, policy and regulatory bodies, financial institutions, energy service companies, technology companies and buyers that influence the adoption of clean technologies were consulted to develop opportunities report outlining the overall size of the cleantech market, recommendations on technologies, market-based mechanisms, and business models to unlock the full market potential.

Also, an interactive panel discussion including representatives from industry, policy and regulatory bodies, financial institutions, energy service companies, technology companies and buyers discussed the opportunities, market-based mechanisms, and business models for the adoption of clean technologies for textile industries in Bangladesh.

Among others, Akber Hakim, MD and CEO, ERI gave the welcome address; Vivek Adhia, Country Director, ISC; Karen Klimwoski, Indo-Pacific Coordinator, USAID; Shayan Shafi, Senior Energy Advisor, USAID/Bangladesh; Suresh Kotla/ Director, ISC gave their remarks.

In the panel discussion, the session moderator was Amit Kumar Singh Parihar, ISC and panelists were: Md. Rezaul Hoq, Director, EEC, SREDA; Mohammed Zahidul Haque, Unit Head, IEEF, IDCOL; Md. Abdul Wahab, GM Planning, Titas Gas, TDCL; Reza Ifthikar Patwary, Sr. Advisor, GIZ; Asif Ibrahim, Director, BGMEA; Shamsuz Zaman, Director, BKMEA; Tushar Tripathi, CEO, Envoy Textiles Ltd.; Representative from Brands – H&M were also present.

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