Going green top priority for financing

Financing environmentally friendly sectors is gaining importance since the country runs the risk of being mostly affected by climate change in the world due to global warming.

At the end of the third quarter (July-September) of 2020, banks and financial institutions increased their financing or in another word "green financing" in sectors that come to the aid of the environment compared to the same period last year.

This information has been highlighted in the report entitled "Green Banking Activities of Banks & Financial Institutions and Green Refinance Activities of Bangladesh Bank" published by the central bank on Sunday.

In the third quarter of this year, the amount of green financing was Tk2,403 crore, which is Tk373 crore more than the same period a year ago.

However, the amount is Tk134 crore less than what was in the second quarter (April-June) of this calendar year.

At the end of third quarter of 2020, the amount of green financing stood at around Tk31,750 crore.

Of this, the amount of defaulted loans is Tk865 crore or 2.72%.

In addition to the central bank's refinancing scheme, banks and non-bank financial institutions also contribute to green financing from their own funds.

For green financing, there are three refinance schemes called Green Transformation Fund, which is funded by the central bank's own funds, Sharia-based banks and financial institutions with excess liquidity and foreign funds.

The central bank and Shariah-based institutions finance the production of environmentally friendly products as part of their refinance scheme.

On the other hand, the export-oriented textile and leather sectors are also funded by foreign aid funds.

At the end of September, state-owned banks played the lead in disbursing loans under the target of green financing. Foreign banks were also way ahead in lending.

The notable sectors under green financing include renewable energy, liquid and solid waste management, recycling and recyclable products, green brick manufacturing and green establishment.

Green banking activities are underway as an initiative to make banks and non-bank financial institutions environmentally friendly.

Under these activities, 610 branches of banks and 3 branches of non-bank financial institutions, 32 ATM booths and 16 agent banking outlets are running on solar power.

Noting that the amount of green financing in Bangladesh is slowly increasing, the report added that in the long run, this will reduce production costs of financing industries and facilitate the entry of those products into new markets abroad.

Whether the production process and the product itself are conducive to environment are becoming key for the export goods to entering European and American markets.