Risks in Financing RMG Sector


Risks Financing:


  • Risks in Financing RMG Sector       Investment Risk:
    • Over Investment- Over investment in office/ factory decoration.
    • Under Investment: Crisis of Fund/ Debt- Interest burden

      Under investment results to :

        Technical aspect: Machineries:

      • Over invoicing (imported)- Money laundering, fund diversion
      • Locally procured (Obsolete/ Reconditioned/ Old)
      • Construction and civil works:
        • Defective construction/ layout plan, [e.g. Rana Plaza]
        • Less participation of equity.
        • Divert borrowed money
        • To save costing, using inferior materials.
        • Less attention / avoidance tendency towards compliance issues (emergency exit stair, narrow stairs, fire extinguisher equipment, child care, doctor room, dining room etc ).Not getting export order from reputed foreign buyer .
        • Reluctant to provide work friendly atmosphere, space saving, light/ ventilation inadequate, unarranged storage of raw materials, unhealthy working environment.
        • Over dependency on hired truck, van (not own vehicle)
        • Manage approval from different authority by undue means.
        • Delay in commencement of commercial operation. Cost rise , bank loan fallen due for payment


        • Planning without sufficient information/ data, lack of supervision, monitoring, close involvement in production & marketing, unready successor/ 2nd line management, one man show.
        • Lack of enough experience in related business line although successfully running other business .
        • Net worth position is weak, not sufficiently solvent to meet emergency need /fund requirement

        Human resource:


        • Unskilled/ semi skilled worker
        • De motivated staffs/ workers due to lower salaries/wages, management behavior.
        • Inefficient in “Staffing”. Inefficient in placing the right person in right place.
        • Switchover/ Turnover rate high.


        • Saturated/ huge competition/ inability of market analysis.
        • Wrong selection of buyer (repatriation of proceed difficult).
        • Weak connectivity buyer.
        • Lack of knowledge & capacity to negotiate/ bargain with buyer.
        • Lack of foresight ness, international business trend, change in buyer’s taste attitude and fashion.
        • Accepting export order with minimum lead time (shipment validity is insufficient to execute export order in time)

        Production related:

        Socio-economic- political:

        Appointing less qualified/ Production/ Factory Manager/ Merchandiser/ commercial due to lower salary/ compensation package.

        • Change in Fiscal, Monetary measure, Govt. policy/ incentives.
        • Political instability (Hartal, Strike, Lock out)
        • Price hike of imported raw materials
        • Competitor country’s conspiracy.
        • Fluctuation of exchange rate
        • Unexpected cost involve due to power/ electricity/ gas crisis
        • Theft, Robbery, Extortion
        • Harassment of Port / customs authority
        • Lack in Bank’s confidence on exporter.
        • Wage hike demand from labour union , if accepted without proper assessment and justification ,this sector may loose a considerable market share internationally.



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