Small businesses’ battle for green growth

Small and medium enterprises (SMEs) are often described as the backbone of Bangladesh's economy, employing millions and driving growth in every corner of the country. Yet as climate risks intensify, their survival and competitiveness increasingly depend on access to sustainable finance. From energy-efficient machinery to waste management systems, the transition requires more than intent; it requires affordable, targeted financial tools. In recent years, Bangladesh's banks, spurred by central bank policy and global sustainability standards, have begun to make headway in tailoring refinance schemes to SMEs.

Progress beyond compliance

When sustainable banking first emerged on Bangladesh's financial landscape, it was largely a matter of compliance. "Over the past decade, sustainable and green banking in Bangladesh has made remarkable progress," noted Ali Reza Iftekhar, Managing Director of Eastern Bank. "When Bangladesh Bank first introduced its Sustainable Finance Policy and Environmental and Social Risk Management (ESRM) guidelines, banks mostly treated them as compliance requirements. Today, sustainability has become a strategic priority for the country's leading institutions."

Eastern Bank, for example, now directs over a third of its total term loan portfolio to green projects, with 89% of its overall portfolio qualifying as sustainable finance. It has disbursed more than BDT 200 crore under Bangladesh Bank's refinancing schemes, while also mobilising foreign funds from institutions such as IFC and ADB. "Our vision is clear: make sustainable finance accessible not just to large corporates, but also to SMEs, women entrepreneurs, and innovators driving change from the ground up," Iftekhar emphasised.

SMEs at the centre

For SMEs, access to concessional credit can mean the difference between outdated, polluting technology and modern, efficient production. Mohammad Ali, Managing Director and CEO of Pubali Bank, underscored this point: "In the case of SMEs, they also need to align more with green financing, because they operate all across Bangladesh. They work in clusters — where there are shoe factories, they are all together; where there is handicraft production, they work there too. So, if you can bring SMEs under green financing, you actually reach the marginal population."

At Pubali Bank, the majority of sustainable finance has already shifted towards SMEs. "Over 88% of investments under sustainable finance last year went to CMSMEs," Ali said, adding that the bank has intentionally reduced its corporate loan portfolio to expand SME access.

Refinance windows opening up

Across the industry, refinancing schemes have become the key enabler. A K M Shahnawaj, Managing Director (Current Charge) of Dhaka Bank, explained: "For SMEs, we offer access to government and Bangladesh Bank's refinance schemes including the Tk. 25,000 crore CMSME programme at 7% interest, the agro-processing refinance facility, and the SME Foundation's revolving fund at 6%. Our Start-up Fund supports young entrepreneurs with concessional loans up to Tk. 80 million at 4%."

These facilities extend to rural areas, marginal traders, and women entrepreneurs, making sustainability a more inclusive endeavour. By lowering the cost of capital, they allow SMEs to invest in areas such as energy efficiency and waste treatment that would otherwise remain out of reach.

Banks leading the push

As Bangladesh's largest SME lender, BRAC Bank has built its brand around marrying sustainability with inclusivity. "We actively utilise Bangladesh Bank's refinancing schemes such as the Green Transformation Fund, the Refinance Scheme for Green Products, and the Technology Development Fund," said Tareq Refat Ullah Khan, Managing Director and CEO (Current Charge). "By combining these green and SME refinancing windows, BRAC Bank not only promotes environmentally responsible enterprises but also ensures inclusive access to finance for small businesses across the country."

BRAC Bank has topped Bangladesh Bank's sustainable banking ratings multiple times and was recently ranked highest among Bangladeshi institutions in Bloomberg's ESG assessment.

Trust in green growth

"Green growth cannot be achieved without green investment," stressed Ahsan Zaman Chowdhury, Managing Director and CEO of Trust Bank. Alongside major financing for green factories, recycling initiatives, and energy efficiency, the bank has launched SME-focused products such as Trust Ekota for groups of small entrepreneurs, Trust Bunon