Potential of a green bank

Even the very nomenclature, 'climate bank' that is, is innovative and highly appealing. Much as the public and private commercial banks may find themselves pitted against overwhelming odds---some of those in an intractable imbroglio, this unique idea of a green bank catering only to the environmental issues demands a closer scrutiny. First of its kind not only in this country but perhaps in the wider world, the bank primarily proposes to help build a green economy. The other important objective it wants to serve is play a crucial role in attaining the country's sustainable development goals (SDGs) scheduled for 2030. An organisation named the Water and Essential (WE) has already submitted its proposal for a licence to the Ministry of Environment, Forest and Climate Change (MoEFC) and the latter has forwarded it to the financial institution division (FID) but not before suggesting the formation of a committee for a feasibility study. But it is the Bangladesh Bank which has the authority to approve a bank.
Notwithstanding the rosy picture the sponsor of the proposed bank paints in favour of mitigating the increasingly growing fragile environment, the details of how its financing will serve the objectives are yet to be available. Even if the bank comes into being, there is no guarantee investors from home and abroad will beeline for investment up to 95 per cent ceiling of capital on offer. More importantly, green banking does not automatically translate into green projects, the majority of which are supposed to be in the energy sector. Production of green energy certainly has immense potential but the technology and set-ups are still costlier than the conventional methods that use fossil fuels. Private companies may not feel particularly encouraged to take up the challenge in this unproven territory of energy. Banks can finance but if there is no taker of loan for investment in power generation or other green initiatives such as developing alternatives to plastic, the green bankability is likely to fall through.
So the sponsors have to convince both the approving authorities and the would-be clientele of the merit of not only green banking but also of gainful use of the capital. One of the veteran economists of the country is reportedly not at all convinced. He has dismissed the idea, saying that at the time of organising a bank or financial institute, its organisers make tall promises only to prove unsubstantial when in practice.
Even without being as much dismissive as this, it is impossible to deny the obtaining reality in the banking sector. The liquidity crisis is acuter now with the exchange rate overshooting the crawling peg of a dollar at Tk120 by Tk6.0-7.0 i.e 1.0 dollar sells at Tk126-127. In such a crunch time, the addition of another bank to the existing 62, far higher than the size of the country's economy can afford, is unlikely to inspire enough enthusiasm much as it may sound appealing. Even its paid-up capital amounting to Tk3.24 billion may not prove lucrative to investors. But if the sponsors can convince foreign investors to come up with money to form a huge primary capital, there is no reason why it should not be given the go-ahead. In that case foreign investors will study every detail before outlaying their money in the venture.