Green, sustainable financing by banks, FIs shrinks in Q3

Green and sustainable financing provided by the banks and financial institutions (FIs) declined during the third quarter (Q3) of 2024, according to a latest Bangladesh Bank report, mainly due to poor overall loan disbursements.
In the July-September quarter, banks contributed Tk 65.85 billion to green financing, showing a 5.64-percent fall from the previous quarter (Q2).
Besides, financial institutions (FIs) contributed Tk 2.12 billion in Q3, recording a sharp decline of 78.64 per cent from the April-June quarter.

The report released Thursday last also highlighted a contraction in sustainable finance. Banks contributed Tk 1,042.4 billion, down 8.4 per cent from the previous quarter, while finance companies contributed Tk 16.313 billion, a decline of 45.48 per cent.
In Q3, 30 banks and seven finance companies exceeded the target of green financing, set at 5.0 per cent of their total term loan disbursements. In Q2, the number stood at 29 banks and 10 finance companies.
Similarly, 31 banks and nine finance companies achieved the sustainable finance target of 20 per cent in the reporting quarter.
This was an improvement from the Q2, when 28 banks and 13 finance companies achieved the target.
In Q3, top 10 banks in green financing were: NCC Bank PLC, Rupali Bank PLC, Pubali Bank PLC, Prime Bank PLC, NRB Bank PLC, City Bank PLC, Premier Bank PLC, Shahjalal Bank PLC, Global Islami Bank PLC and Eastern Bank PLC.
In sustainable finance, the top 10 banks were: BRAC Bank PLC, Pubali Bank PLC, City Bank PLC, Jamuna Bank PLC, Eastern Bank PLC, Dutch-Bangla Bank PLC, Prime Bank PLC, EXIM Bank PLC, United Commercial Bank PLC and NCC Bank PLC.
Sustainable finance refers to conducting business in such areas and in such a manner that helps reduce overall external carbon emissions and internal carbon footprints.
Bankers said that the drop in the green and sustainable finances is mainly due to poor overall loan disbursements during the period.
They said the business expansion and new businesses are not coming leading to reduction in the green and sustainable finances.
Syed Mahbubur Rahman, managing director of Mutual Trust Bank PLC, said that investments in the green financing sector are very important to bring sustainability to the country's economy.
Mr. Rahman told the FE: "The overall loan disbursement remained poor and this is the main reason behind the drop in the green and sustainable finance."
He noted that the business expansion and new businesses are not coming to the banks for the loans and said the performance of opening of letters of credit (LCs) also remained poor.
Meanwhile, the central bank is trying to boost the whole scenario by taking appropriate policy initiatives.
To broaden the financing avenue for green products like solar energy, bio-gas plant and effluent treatment plant, Bangladesh Bank established a revolving refinance scheme amounting to Tk 2.0 billion from its own fund for solar energy, bio-gas and effluent treatment plant (ETP) in 2009.
The fund size has been increased to Tk 4.0 billion in view of the growing demand for financing environment-friendly products.
In January 2016, a long-term refinancing scheme named Green Transformation Fund (GTF) of US$200 million was launched to ensure sustainable growth in export-oriented textile and leather sectors conducive to transformation of the green economy in the country.
Later, 200 million Euros was added to the fund.
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