Bangladesh Bank expands green financing scheme

Bangladesh Bank has brought under its green banking refinance scheme, taken up four years back, more sectors in the wake of growing demand for renewable energy and environment-friendly growth in the country.The new sectors to come under the scheme of green financing include setting up plants for solar mini grid, solar irrigation pump system, vermicompost production, hydropower, PET( polyethylene terephthalate) bottle reprocessing, solar battery reprocessing, LED bulb and Hybrid Hoffman Kilns in brick kilns for reducing carbon emission.
The central bank on Monday day wrote to commercial banks detailing the scheme. It increased credit limit for the sectors under the scheme, according to a circular issued Monday.
The central bank launched the Tk2bn green banking refinance scheme in August 2009 to set up solar panel, bio-gas plants and industrial ETP (effluent treatment plant) under the scheme – to help reduce industrial pollution and increase power supply.
The fund has been named the “solar energy, biogas and effluent treatment plant sector refinance scheme.”
“The new more sectors have been brought under the green banking refinance scheme to build environment-friendly economy,” said the circular.
Under the scheme, Bangladesh Bank is providing loans to commercial banks at 5% to 12% interest rates for direct refinancing and credit wholesale to entrepreneurs, who will then have access to commercial bank loans in those sectors at a maximum of 5% more interest. Overall interest rates will not exceed 12%, according to the fund’s conditions.
A maximum of 100 percent refinance facilities will be provided to the banks against their finance to support the setting up green energy projects in rural and urban areas and effluent treatment plants for industries, said the circular.
Under the revised scheme, the banks can sanction up to Tk40m loans for setting up effluent treatment plants. earlier ThE limit was Tk10m.
The banks will be allowed to provide loans up to Tk175,000 in rural areas to install home solar systems and Tk150,000 for setting up solar mini grid.
For biogas plants, loans of Tk50,000 to Tk2.5m can be allocated for coordinated cattle farming under the scheme. For PET bottle reprocessing plant, LED bulb manufacturing plant and environment-friendly brick kilns, banks can provide credit up to Tk50m.
The scheme was undertaken in line with the government’s plan to meet 5 percent of the total demand for electricity from green energy by 2015 and 10 percent by 2020.
According to the latest available information, of the Tk2bn fund, the BB so far disbursed Tk853.54m up to December 2012.
The credit flow to the green projects from the refinance scheme shows that the disbursement level is yet to reach a satisfactory level due mainly to reluctance of banks, said an official.
– BB circular

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