Green and sustainable financing by banks and non-bank financial institutions (NBFIs) declined by 2.26 per cent in the January-March quarter of 2024 compared to the previous quarter, amid a turbulent economic climate.
According to Bangladesh Bank's latest 'Quarterly Review Report on Sustainable Finance of Banks and Financial Institutions (FIs)', green loan disbursements totaled Tk 959.35 billion in Q1 2024 -- down from Tk 981.08 billion in Q4 2023.
The report shows the combined green finance contribution from banks and NBFIs in Q1 2024 was Tk 72.39 billion, a decrease of Tk 1.65 billion from Q4 2023.
However, the data also shows a marginal 2.24 per cent increase in overall green financing by banks and NBFIs during the same period.
According to the breakdown, banks invested Tk 59.67 billion and NBFIs contributed Tk 12.71 billion to green finance in Q1 2024.
The report notes that the banking sector is a major source of funding for industries like steel, paper, cement, and chemicals, which have heavy carbon footprints.
The report says the banking sector can act as a bridge between economic and social development, while also promoting environmentally sustainable and socially responsible investments.
Similar trends are observed in sustainable finance data.
The combined contribution from banks and NBFIs to sustainable finance in Q1 2024 was Tk 886.96 billion -- a decrease of Tk 20.07 billion compared to Q4 2023. Despite the decline, there was a slight increase of nearly 2.21 per cent in overall sustainable financing during the period.
Banks invested Tk 853.37 billion and NBFIs contributed Tk 33.59 billion to sustainable finance in Q1 2024.
All scheduled banks and NBFIs have established dedicated sustainable finance units, complying with regulatory requirements.
The Bangladesh Bank introduced its Sustainable Finance Policy in December 2020, defining sustainable finance for banks and NBFIs.
According to the policy, banks and FIs have to allocate 5 per cent of their term loan disbursements to green financing and 20 per cent to sustainable finance overall.
According to BB data, there were no investments in green bonds, green sukuk or impact funds by banks and NBFIs during Q1 2024.
Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank (MTB), cited the current economic climate as a potential reason for the decline in green financing distribution.
Even with these challenges, he is hopeful that fund distribution will grow positively soon.
Mr. Rahman also highlighted that banks and financial institutions are carefully following the rules for distributing funds.
In the January-March quarter, the top performing banks were BRAC Bank PLC, Eastern Bank PLC, City Bank PLC, Jamuna Bank PLC, Prime Bank PLC, Mutual Trust Bank PLC, Bangladesh Krishi Bank, National Bank PLC and Trust Bank Limited.
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