Green finance rises 127% in Dec quarter

Loans to green industries and projects, popularly known as green finance, increased to Tk4,678 crore in the October-December quarter of 2022, up 127% compared to that of the same quarter of the previous year, according to the latest Bangladesh Bank report.

Thirty-six banks out of 61 and 11 non-bank financial institutions out of 34 have had exposure in green finance in the quarter, the report reads, while banks invested Tk4051 crore and financial institutions Tk627 crore to the sectors.

With the latest addition, outstanding loans to green sectors in the country stood at Tk35,406 at the end of December, which was around 7% of the total outstanding term loans of the lenders.

As per the central bank directives, bank and non-bank financial institutes are supposed to disburse at least 5% of their loans to green sectors. The banks and financial institutions achieved the target in all four quarters of 2022.

The recognised green sectors include renewable energy, energy efficiency, alternative energy, liquid waste management, solid waste management, recycling and manufacturing of recyclable goods, environment-friendly brick production, green/environment-friendly establishments, green Agriculture, Green CMSME and so on.

"Both banks and non-bank financial institutions are performing well in green financing. The central bank is also making all-out efforts to promote such financing through several refinancing schemes which offer the highest 5% interest rate at the customer level. Banks are also using their own funds," a Bangladesh Bank senior official, who wished to remain unnamed, told The Business Standard.

He hopes that the country will see a great output from these efforts within 2025.

"We have reports of 11 green-financed projects at our hands, which shows that they [the projects] have cut down carbon emissions by 1,700 tonnes per year. If all projects report, the cut will be much higher," he added.   

The central bank report said 19 banks and 9 financial institutions surpassed the target of green finance during the December quarter of 2022. Of them, State Bank of India, Jamuna Bank, United Commercial Bank, Shahjalal Islami Bank and Janata Bank are the top 5 achievers in the bank category, while Aviva Finance, Bangladesh Infrastructure Finance Fund, and Infrastructure Development disbursed 100% of their term loan in green finance.

Overall sustainable finance, which refers to the businesses conducted in such areas and in such manners that help the overall reduction of external carbon emission and internal carbon footprint, increased by 53% to Tk40,000 crore year-on-year in the quarter, the report said. The disbursement was 11.59% of the total term loans of the lenders.

"55 Banks out of 61 and 16 financial institutions out of 34 have had exposure in sustainable finance in the reporting quarter. In the December 2022 quarter, 13 banks and 11 FIs have been able to fulfil their target [20%] of sustainable finance compared to the total loan disbursement. Among the banks, State Bank of India, Bangladesh Krishi Bank, National Bank, Shahjalal Islami Bank, and Rajshahi Krishi Unnayan Bank performed well," the Bangladesh Bank report reads.