Amid some disarray in local banking situation, a private organization wants licence to establish a global-standard unconventional climate bank, first of its kind in Bangladesh, sources said.
A cardinal objective of the bank is to preserve nature and address environmental issues that are looming large in the climate-vulnerable country.
The proposed bank is conceived in a global-standard climate-bank model with Tk 3.24 billion as its paid-up capital, they added.
Likely to be named 'Green Bank Ltd', the specialized bank may be set up under public- private partnership (PPP) or local and foreign partnership.
The Water and Essential (WE) organization has recently submitted the proposal to the Ministry of Environment, Forest and Climate Change (MoEFC) and it has suggested forming a committee to conduct a feasibility study or to ascertain whether or not the proposal is implementable.
The MoEFC has forwarded the request to the financial institutions division (FID) to take necessary step.
Contacted, a senior official concerned of the FID said, "We received a proposal sent by the MoEFC to set up a climate bank named 'Green Bank' in the country. The proposal is supposed to be forwarded to the central bank to take next course of action or scrutinize the proposal regarding the issue."
Currently, there are 62 scheduled banks in Bangladesh which operate under full control and supervision of Bangladesh Bank which is empowered to do so through the Bangladesh Bank Order 1972 and the Bank Company Act 1991.
Of them, 43 are private commercial banks which are majorly owned by individuals or private entities. The PCBs can be categorized into two groups- Conventional and Islami Shariah-based.
An executive director of the central bank, preferring anonymity, told the FE that last couples of months, the local banking sector has been vulnerable. "It has been suffering from different crises, mainly liquidity crisis. For this, issuing licence for operating new bank in the country is quite impossible."
Besides, the country's economic size is not supportive of issuing licence for running a new bank.
"Almost all the fourth-generation banks in Bangladesh were given licences on political considerations. But all of them are now in crucial stage. Most of them have been facing liquidity shortage," he says.
A few of these banks have, however, shown promising performance, while many are riddled with serious challenges, including liquidity crises, high non-performing loans (NPLs), reputation issues, and regulatory penalties, a Bangladesh Institute of Bank Management (BIBM) study revealed recently.
The Climate Bank model (Green Bank) is not a conventional bank. It is a completely climate-friendly for-profit company.
Where data preserved is called Data Bank and where blood collected that also called Blood Bank. So, the proposed green bank is where the environment and ambient remain preserved and safe, according to the entrepreneurs.
"It is a non-profit-and profit joint venture. It is an exceptional business as it adheres to environmental, social and governance (ESG) conditions," the proposal says, adding that the green-bank model not only adheres to ESG conditions but also plays a strong role in building a green economy.
Some 5.0 per cent to 7.0 per cent of the paid-up capital is retained by the entrepreneurial organization--Water & Essentials. The remaining 93 per cent to 95 per cent of the ownership is open to domestic, foreign investors.
The non-profit claims that the proposed bank will play a major role in achieving the 2030 SDG goals. This bank model can be said to be the first climate-bank model proposed in the world which is unique in terms of environment, environment and green economy. It is replicable in any country in the world.
Local experts are against licensing new bank company in the country as the local banking sector currently is passing troubled times. The government should work to bring the banking sector in the sustainable level from the vulnerable situation.
Contacted, Executive Director of the Institute for Inclusive Finance and Development (InM) Dr Mustafa K. Mujeri said in the past, many bank entrepreneurs had said they would conduct bank business with good practice during taking licence. After conducting banking company, many of them have created misery in the local banking sector through financial irregularities.
"The banking sector of the country is now passing through multiple difficulties. So the central bank should look after how to recover the banking sector instead of issuing new licence," he added.
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