Home ›› 18 Apr 2023 ›› Front
The country’s financial sector is increasingly recognising the importance of sustainability in its operations, particularly as more eco-friendly projects gain popularity.
The term sustainable finance refers to the process of taking environmental, social and governance considerations into account when making investment decisions.
The latest data of the Bangladesh Bank shows 13 banks and 11 non-bank financial institutions (NBFIs) gave out Tk 41,104 crore in sustainable projects from October to December of 2022, up from 53.60 per cent a year ago.
The sustainable finance by banks and NBFIs was at Tk 31,885 crore in the September quarter of last year and it was at only Tk 26,760 crore in the December quarter of 2021, according to the central bank.
During the period, banks and NBFIs disbursed Tk 10,973 crore in sustainable agriculture; Tk 5,637 crore in sustainable CMSME and Tk 7,947 crore in socially responsible financing alongside disbursing Tk 8,403 crore as working capital and demand loans of green products, projects and initiatives; Tk 3,463 crore in priority green and eco-friendly products for the trading sector and Tk 4,678 crore in green finance, as per the BB data.
In the October to December quarter, private commercial banks disbursed the highest Tk 31,471 crore in the sustainable projects and foreign commercial banks disbursed Tk 3,599 crore. The state-run development bank disbursed Tk 2,946 crore and state-owned commercial banks disbursed Tk 1,970 crore in sustainable projects and initiatives.
Banks and NBFIs disbursed sustainable and green finance in renewable energy, energy efficiency, alternative energy, liquid waste management, solid waste management, the establishment of certified green buildings, the establishment of the certified green industry, bio-gas plant, installation of energy auditor certified machinery including boiler industry, solar home system and biological ETP sector.
The central bank data said that banks and NBFI recovered Tk 27,141 crore from the borrowers during the quarter and rescheduled loans of Tk 2,087 crore.
One of the directors of the Bangladesh Bank told The Business Post said that the central bank is pursuing to boost up the whole scenario by taking appropriate policy initiatives.
He said that refinance support from BB is also playing an important role to incentivise green banking activities.
“As the outcome of these initiatives, it is expected that positive impact will be evidenced in the trend of sustainable finance by banks and FIs in a gradual manner,” as per the BB official.
Anis A Khan, former chairman of The Association of Bankers Bangladesh (ABB), told The Business Post that the growth of sustainable finance in the December quarter is good but it is still slow compared with the sectoral growth.
He said green finance and sustainable finance were first introduced in 2011 but still a small portion of banks were involved in the most vital financing.
He said there are 61 banks in the country but there is a lack of experienced and skilled bankers in the sector which is one of the reasons behind the lower participation of banks.
Anis, also a former managing director of Mutual Trust Bank, banks also have less scope to invest in sustainable finance because there remain few sustainable projects or initiatives in the country.
Refinance scheme for environment-friendly initiatives
To broaden the financing avenue for green products like solar energy, bio-gas plant and effluent treatment plant etc, BB established a revolving refinance scheme amounting to Tk 2 billion (2,000 crore) from its own fund for solar energy, Bio-gas and Effluent Treatment Plant (ETP) in 2009.
The size of the fund has been increased from Tk 2 billion (2,000 crore) to Tk 4 billion (4,000 crore) given the growing demand for financing of environment-friendly initiatives.
