BB to ease financing for green projects

The central bank will extend the tenure for loan repayment in the renewable energy sector and slash the interest rate, in a move to encourage green financing, Governor Atiur Rahman said yesterday.

“The loan repayment tenure can be extended from an existing three years to eight years,” said Rahman, responding to proposals on promoting green financing at the inaugural session of a conference.

NeoStar Innovation, in partnership with German cooperation agency GIZ, Rahimafrooz Solar, Energypac, NCC Bank, IFIC Bank and NRB Global Bank, organised the conference -- Green Finance for Sustainable Development -- at the CIRDAP auditorium in Dhaka.

It will be easy for farmers or other ordinary people, who adopt green projects like solar home and solar irrigation systems, to repay their credit amount, Rahman said. The move will also increase the use of the central bank's refinancing scheme, he added.

“We can also arrange refinancing schemes at lower interest rates from the finance ministry for green projects,” he said, asking the central bank officials to take necessary steps to this effect.

Rahman also instructed an official to form an advisory committee by the end of the year comprising all stakeholders, including banks, association leaders and entrepreneurs in the green energy sector, to resolve problems through consultation.

Referring to a cold store that was set up with the central bank's corporate social responsibility fund in Rajshahi recently, Rahman urged all banks to establish at least one cold store each with their CSR funds to help farmers preserve their produce at low costs.

He however asked the banks to remain cautious in green financing as 'red' projects, in the name of green, will try to take advantage.

Constructing only roads, buildings and factories does not mean development, he said. “Development is a change of mind, a new kind of realisation, new thinking and ideas and sustainability -- these are the main factors of a green economy.”

Referring to the Lima conference in Peru, he said policymakers almost reached a consensus on making a roadmap on financing to fight the adverse impacts of climate change. “When the world is moving forward to green financing, we cannot lag behind. We have to move forward.”

“Can we not understand that we are arranging subsidies for traditional energy, but not providing enough incentives for green financing? Despite knowing the facts, we remain silent,” Rahman said.

“Let us concentrate on building a green world for our next generation.”

He said human greed is one of the main factors behind damaging nature. “We have to find ways on how to finance green projects to keep nature alive.”

Rahman said the central bank has so far identified 47 green products under its refinancing scheme, where 23 are for green energy. “If any bank or financial institution comes up with innovative green product ideas that will truly contribute to conserving the environment, the central bank will seriously look into the issue to identify it as a green product."

The BB has set an annual target for the banks and financial institutions for direct financing in the sector that will be mandatory from January.

In a presentation, Munawar Misbah Moin, managing director of Rahimafrooz Renewable Energy, said solar power contributes around 160MW to the national grid.

There is still an opportunity to invest Tk 8,000 crore in renewable energy, he said, requesting the government to simplify the loan disbursement system in the sector.

David Peter Hancock, programme manager of the sustainable energy development programme of GIZ, said there is a lack of familiarity among the banks about green financing. “Money is there, on the other hand, projects are there as well. But there is no connection,” he said, urging the central bank to take steps to make a connection between the banks and green projects.