IFC invests in mega rice mill project to boost food security in Bangladesh

Highlights

The International Finance Corporation (IFC), the private sector arm of the World Bank Group, has made a groundbreaking move by providing funding to a Bangladeshi private company to establish a state-of-the-art automated composite rice mill.

With a total investment of Tk700 crore, the project aims to produce boiled and non-boiled rice, as well as oil, poultry feed, and electricity from husk materials.

Under the agreement, Tanveer Food Limited (TFL), a subsidiary of the renowned Meghna Group of Industries (MGI), will receive $35 million in funding from IFC, while MGI will contribute the remaining capital.

The funding package includes $21 million from the IFC's own account and an additional subordinated loan of up to $14 million from the Private Sector Window of the Global Agriculture and Food Security Program (GAFSP).

Both parties signed an agreement in this regard at MGI's headquarters in Gulshan on Monday.

The initiative is set to enhance food security and improve the livelihoods of over 1,23,000 smallholder farmers, particularly women.

Mostafa Kamal, chairman and managing director of Meghna Group, expressed his enthusiasm about securing financing from the IFC, highlighting that it demonstrates the group's commitment to due diligence and compliance.

He said the installation of machines on a 40-acre plot in Bogura Sadar has already been completed. "Commercial production is expected to commence within three months."

Once operational, this mega rice mill will have an annual production capacity of 3.5 lakh tonnes, making it one of the largest facilities of its kind in the country.

The loan provided by IFC is a long-term investment, and while the exact interest rate has not been disclosed, it will likely be based on LIBOR (London Inter-Bank Offered Rate) plus a fixed rate, said Kamal.

This pioneering project represents IFC's first investment under its Global Food Security Platform (GFSP), a $6 billion global financing facility aimed at addressing the worldwide food crisis and establishing a more resilient global food system.

This financial support will enable TFL to establish a cutting-edge automated rice mill in the Bogura region, with a daily processing capacity of 1,000 tonnes.

The mill is projected to produce over 1,70,000 tonnes of high-quality packaged rice by 2027.

Also, the investment will facilitate the construction of an 80-tonne-per-day rice bran oil plant and a husk-based cogeneration plant for heating and electricity.

These ancillary facilities will contribute to climate mitigation efforts and enhance resilience against volatile energy costs during production.

Tahmina Binthe Mostafa, director of MGI, emphasised the project's significance in modernising Bangladesh's rice milling sector.

She said the shift from traditional husking mills to automated facilities is crucial for improving rice quality and increasing the shelf life of packaged rice.

With the growing demand for packaged rice and evolving consumer preferences, this investment will contribute to the modernization and expansion of rice processing and distribution in northern Bangladesh, she said.

While Bangladesh stands as the third-largest rice producer globally, the nation faces food security risks exacerbated by the surge in food and energy prices triggered by Russia's invasion of Ukraine.

Riccardo Puliti, IFC's regional vice president for Asia and the Pacific, emphasised the importance of food security, stating that "food security means rice security" in a country like Bangladesh.

Puliti further highlighted the positive impacts of the rice milling project, including job creation, increased income for smallholder farmers, and enhanced resilience in the global food supply chain.

Under its Global Food Security Platform, IFC aims to reduce volatility in food markets by providing emergency financing to farmers, commodity traders, food processors, and other private stakeholders facing funding restrictions and sudden spikes in costs.

In Ukraine, where crop production and food storage capacity need restoration, IFC will increase its provision of working capital and long-term financing.

Moreover, IFC will explore localised production of key staple crops and assess the commercial viability of traditional wheat alternatives in African and Asian markets, given the impact of the Ukrainian conflict on global grain supplies, according to a statement issued by the IFC.

As the world faces acute food security challenges, with an estimated 276 million people experiencing acute hunger in 2021, the investment by IFC in this rice mill project is a significant step towards building a more resilient future for consumers and farmers alike.

The project not only addresses immediate food security concerns but also sets the stage for sustainable agricultural practices and a strengthened rice market in Bangladesh.

IFC / Rice Mill / Tanveer Food Limited / Food Security in Bangladesh / Meghna Group