Investments in sustainable finance grow 87% year over year

Bangladesh Bank data shows that at the end of June this year, funding for the sustainable finance sector stood at Tk 31,622 crore, an increase in investment of 87.20% from to the previous year.

A central bank study claims that one of the main sources of financing for the most carbon-emitting industrial projects, including steel, paper, cement, chemicals, fertilizers, electricity, textiles, etc., is the banking sector. As a result, the banking sector can promote environmentally friendly and socially conscious investments, bridging the gap between economic and social development and environmental protection.

At the end of June, financing in this sector increased to 12% of all loan disbursements, above the central bank’s target of 20%. However, only 6.48% of all loans in June of the previous year were allocated to this sector.

The economic viability of the country, according to Arfan Ali, former managing director of Bank Asia Limited, depends on investments in the green finance and sustainable finance sector. To reduce the country’s investment, social and corporate governance risks, it is crucial to invest in this sector.

To further increase green financing in the country, the central bank has set a target of 5% of all term loans from 2016. By the end of June this year, banks and other financial institutions had almost surpassed their annual green finance target.

Moreover, he said that banks that follow the funding rules of this industry will do well in the future. Additionally, there are specific global guidelines for investment in these sectors which, if followed, will promote faster development.

At the end of June, green finance loans held by the country’s banks and financial institutions totaled Tk 2,621 crore, or 4.13% of all term loans. However, during the same period last year, the loan amount was Tk 1,788 crore or 2.39% of the total term loan.

Compared to the overall disbursement of term loans for the quarter, 14 banks exceeded the green funding target by 5%, according to central bank data. Seven other non-banking financial institutions (NBFIs) also succeeded in their mission.

During the same quarter, from April to June 2022, 11 banks simultaneously reached their target of 20% sustainable financing compared to total loan disbursement. Senior central bank staff member: “Support for BB refinancing is also essential to encourage green banking. As a result of these activities, it is expected that banks and NBFIs will gradually show a favorable impact on the trend of sustainable finance.

Ten banks and five non-banking financial institutions (NBFIs) were recognized this month by the Bangladesh Institute of Banking Management (BIBM) for their outstanding work in sustainable finance. Agrani SME Financing, Bangladesh Finance and Investment, Bangladesh Infrastructure Finance Fund, IDLC Finance and IPDC were recognized in the NBFI category, while Bank Asia, Brac Bank, Dutch-Bangla Bank, Eastern Bank, Exim Bank, Islami Bank Bangladesh, NRB Bank, Pubali Bank, Southeast Bank and City Bank were recognized in the bank category.

Summary of news:

  • Investments in sustainable finance grow 87% year over year
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