Bank financing rising for green, sustainable projects
Bangladesh's banks are increasingly extending finance for green and sustainable initiatives taken by businesses in an attempt to encourage environment friendly investments and mitigate the effects of climate change.
From July to September of fiscal year 2022-23, banks had provided Tk 2,670 crore to green initiatives such as bringing energy efficiency at factories and eco-friendly brick kilns and agricultural schemes.
The amount of disbursement was up 78 per cent year-on-year, according to Bangladesh Bank data.
Such financing by banks and non-bank financial institutions (NBFIs) stood at Tk 7,548 crore from January to September of 2022, accounting for 4.20 per cent or of all term loans.
The ratio of green finance to total term loan disbursement in the whole of 2021 was 3.06 per cent.
With the increase, sustainable finance to total loan disbursement increased to 11.08 per cent during the January-September period of 2022.
During the same period in 2021 it was 8.04 per cent, said the central bank in its Quarterly Review Report on Sustainable Finance of Banks & Financial Institutions released last week.
"We are giving importance to green financing to encourage environmental-friendly initiatives," said Md Abdus Salam Azad, managing director and CEO of state-run Janata Bank.
"Pollution has increased in the country. So, we are focusing on projects that will reduce pollution," he said.
Janata Bank is one of the 15 banks that surpassed the 5 per cent ratio targeted for green finance to total term loan disbursement.
The state-owned bank has so far financed several projects in various sectors such as in garments, solar power generation, environment-friendly brick kilns and ceramics manufacturing, according to the CEO.
For the last couple of years, Bangladesh Bank has been encouraging banks to lend to environment friendly projects in order to facilitate sustainable economic development by reducing carbon emission and global warming and protecting nature.
The central bank has also formed four refinancing funds to encourage banks and financial institutions to lend to entrepreneurs.
These are a Tk 400 crore green product and initiative fund, a green transformation fund, a Tk 1,000 crore technology upgradation fund and a Tk 125 crore Shariah-based refinancing scheme for green products.
Bangladesh Bank said all scheduled banks and financial institutions have formed their own "Sustainable Finance Unit".
And as per a "Sustainable Finance Policy" prepared by the central bank in December 2020, it is mandatory for all banks and financial institutions to prepare their own sustainable finance policy.
In the July-September period of 2022, some 34 banks and eight non-bank financial institutions (NBFIs) had exposure in green finance.
Including green and sustainability-linked finance, 53 banks and 15 NBFIs provided finance to environment-friendly projects.
Increased awareness of banks has contributed to higher financing to sustainable projects, said Chowdhury Liakat Ali, additional director of Sustainable Finance Department of Bangladesh Bank.
Besides, a rating of the central bank for banks to recognise performance in sustainable finance is inspiring the lenders, he added.
Ali said a good portion of the green finance was going to energy efficiency initiatives in textile factories and establishment of green factories as exporters want to cut carbon emissions to attract international buyers and compete in the global market.
A senior official of Bank Asia, one of 15 that surpassed the 5 per cent ratio targeted for green finance to total term loan disbursement, said the private bank has a good amount of finances focusing renewable and alternative energy.
"We have lent to establishment of biogas plants, solar power and effluent treatment plants and energy saving brick kilns in order to reduce carbon emission," he said.
"We are committed to green financing. We will increase our financing in the coming days by following the guideline of the central bank," he said.
Comments