BB allocates Tk1,000cr green transformation fund for rural industries

The initiative is aimed at supporting small-scale and regional entrepreneurs in acquiring environment-friendly machinery and components to transform local industries into greener and more sustainable production units, said a BB circular issued today.

According to the circular, the central bank had earlier formed a revolving Green Transformation Fund amounting to Taka 5,000 crore from its own resources to support sustainable growth in manufacturing and export-oriented industries.

The newly earmarked Taka 1,000 crore has now been reserved exclusively for rural and local industrial enterprises in an effort to decentralize green industrialization and expand sustainable economic activities beyond major urban centers.

Under the refinance scheme, participating financial institutions (PFIs) will receive funds from Bangladesh Bank at an interest rate of only 1 percent, while the maximum interest rate at the customer level has been fixed at 5 percent.

The loan tenure will range from two to five years depending on the nature of the project, while entrepreneurs will also be allowed a grace period of up to six months subject to the relationship between the borrower and the participating bank.

The facility will support projects related to renewable energy, energy efficiency, water conservation and management, waste management, resource efficiency and recycling, and initiatives aimed at improving workplace environments. 

Through these measures, the central bank intends to encourage the adoption of green technologies and sustainable production practices at the grassroots industrial level.

According to the circular, the maximum loan amount for a single borrower has been fixed at Taka 5 crore. The debt-equity ratio must not exceed 80:20 of the total import or purchase cost.

In addition, at least 10 percent of the total electricity consumption of financed projects must come from renewable energy sources.

Bangladesh Bank also imposed strict eligibility conditions for borrowers. Loan defaulters will not qualify for the scheme, and participating banks must verify updated Credit Information Bureau (CIB) reports of borrowers and all related interests before approving any financing.

All state-owned commercial banks will be eligible to participate as PFIs under the scheme. Private and foreign commercial banks, however, must maintain classified loan rates below 20 percent to qualify. Islamic Shariah-based banks have also been allowed to participate through their approved investment mechanisms.

Banks interested in joining the programme will have to sign a “Participation Agreement” with the Sustainable Finance Department, although banks already operating under existing GTF agreements will not require new agreements.

The circular, issued under Section 45 of the Bank Company Act, 1991 (amended in 2023), came into effect immediately. 

To ensure accountability and transparency, participating financial institutions will be required to submit quarterly reports to the Sustainable Finance Department within 15 days after the end of each quarter. 

Bangladesh Bank warned that fines may be imposed for providing false information or failing to comply with reporting requirements, reports BSS.