BB launches Tk 1,000cr green fund for rural, local industries

Bangladesh Taka 200 currency notes.

In a major push to decentralise sustainable industrialisation, Bangladesh Bank has established a special Tk 1,000 crore refinancing fund dedicated to making rural and local industries environment-friendly.

Under this scheme, entrepreneurs will be able to access credit at an interest rate of maximum 5 percent.

The Sustainable Finance Department of the central bank issued a circular in this regard on Monday.

According to the directive, this amount has been carved out of the central bank's existing Tk 5,000 crore Green Transformation Fund (GTF) specifically to support grassroots and localised industrial growth.

The fund is designed to finance the import of environment-friendly machinery or the purchase of locally manufactured green equipment.

Eligible sectors for financing include renewable energy (installation of solar and wind power systems), resource management (energy efficiency, water conservation, and wastewater management), waste management (recycling activities and waste-to-energy projects) and work environment (-improving factory safety and occupational health standards).

The central bank has structured the fund to be highly attractive for both lenders and borrowers.

The borrower interest rate has been capped at a maximum of 5 percent. Participating banks will receive funds from the central bank at a mere 1 percent interest.

An individual entrepreneur can borrow up to Tk 5 crore and banks can provide up to 80 percent of the total import or purchase cost.

The loan term ranges from two to five years, including a maximum six-month grace period.

Eligibility and Mandatory Green Criteria

To ensure the funds achieve their environmental goals, the central bank has set a mandatory condition: at least 10 percent of the total electricity used in the financed project must be sourced from renewable energy, such as solar power.

Eligible Banks

All state-owned commercial banks are eligible to distribute these loans. Private and foreign commercial banks must maintain a non-performing loan (NPL) ratio below 20 percent to participate. Loan defaulters (individuals or institutions) are strictly prohibited from accessing this facility.

Impact on Local Industries

Bangladesh Bank believes this initiative will significantly bolster the capacity and competitiveness of local industries. By lowering the cost of green technology, the fund is expected to accelerate the transition of small and medium-scale rural enterprises into sustainable, resource-efficient entities, aligning with the national goal of achieving a green economy. - UNB