A Study on Credit Rating Factors of Readymade Garments in Bangladesh

This study was conducted to identify the primary financial determinants influencing the credit rating process for readymade garment (RMG) factories in Bangladesh based on seven commonly reported financial factors found in various credit rating reports. The data used in this study were collected from secondary sources, specifically from credit rating reports. These reports were gathered from 50 readymade garment (RMG) factories. This study measures the correlation between credit ratings and the seven common financial determinants through quantitative analysis using the bivariate (Pearson) correlation method. Additionally, a Boolean search technique was employed to collect related studies. In terms of data design, numerical values and positive/negative modifiers from long-term credit ratings (e.g., AAA1, AAA2, BBB1, BBB+, and BBB-) were removed for a better clarity. Data and findings are presented through graphical figures and statistics. The study reveals that rating agencies heavily rely on sales volume when assigning credit ratings to RMG factories in Bangladesh [Sales: r (48) = -.66 (long-term rating rank), p<.05; -.59 (short-term rating rank), p<.05]. Furthermore, the study shows that the majority of RMG factories have received a “ST-3” rating for the short term and a “BBB” rating for the long term. This exploratory study adds value as factory management can directly benefit from its insights, enabling them to understand the strategies needed to enhance their credit ratings. In addition, credit rating agencies will benefit from this study by adopting a more comprehensive framework for assigning credit ratings to RMG factories in Bangladesh.