For years, Banolata Refractory had desired to transition to producing environmentally-friendly bricks while reducing its carbon emissions. However, the company faced financial constraints that prevented the construction of a greener and cleaner kiln.
In early 2020, Banolata discovered the low-interest loan opportunities for sustainable and green projects offered by Bangladesh Bank. With a favorable interest rate of 6%, the company secured a loan of US$462,000 (RM2.091mil) to build a Hybrid Hoffman Kiln (HHK). The HHK significantly reduces coal usage compared to traditional ovens, resulting in decreased pollution and greenhouse gas emissions.
Shahidul Islam, the factory operations manager at Banolata, stated, “Now, (the company) is a leading brick-maker providing the majority of bricks in the northern part (of Bangladesh). HHKs use only half as much coal as fixed chimney kilns. We are reducing up to 70% carbon.”
Bangladesh is experiencing significant growth in green finance, with both the central bank and private banks actively encouraging companies in various sectors, from brick manufacturing to textile mills, to invest in climate change solutions and innovative technologies.
Despite being vulnerable to climate change impacts, such as flooding, river and coastal erosion, and storms, Bangladesh has been at the forefront of developing financial innovations to combat climate challenges. The nation’s sustainable and green finance policies, developed over a decade ago, have gained global recognition and influenced the approaches adopted by central banks in China, Indonesia, Thailand, and Uganda.
However, analysts argue that limited capacity at the central bank and private banks hinders progress. They emphasize the need for the development of green financial instruments, like green bonds, to enable the market to mainstream green finance effectively.
Since launching its green and sustainable finance policy in 2012, Bangladesh Bank has provided loans with interest rates 2-4% lower than the standard lending rates, accompanied by extended repayment terms. To boost adoption, the central bank adjusted its policy in 2020, making it mandatory for financial institutions to allocate at least 15% of their loan budgets to sustainable projects and 5% or more to green initiatives.
Last year, banks and financial institutions invested US$12 billion (RM54.3 billion) in sustainable finance and over US$1.1 billion (RM5 million) in green finance, representing significant increases of 58% and 69% respectively from the previous year. Bangladesh now offers over 117 financing products focused on areas such as solar energy, biogas projects, waste management, and organic farming.
Furthermore, Bangladesh Bank has established awards to recognize the best performers in sustainable finance, and all banks now have dedicated green or sustainable departments.
In addition to banks, insurance brokers and microfinance institutions are also contributing to the green and sustainable finance sector. For example, the Sajida Foundation issued the nation’s first green bond, using the funds raised to provide micro-loans to farmers and impoverished families in the districts where it operates.
With greater focus on green and sustainable projects, Bangladeshi companies, including garment manufacturers, are taking advantage of the available loans. The Bangladesh Garment Manufacturers and Exporters Association reported that more than 185 garment factories have obtained LEED certification, demonstrating their commitment to environmentally-friendly practices.
Envoy Textile, an exemplary company in this regard, secured a loan of US$1.84 million (RM8.33 million) with an attractive interest rate of 5.5% in 2021. The company utilized the loan to replace its traditional machinery with eco-friendly technology, resulting in reduced carbon emissions. Moreover, the adoption of environment-friendly equipment has led to increased demand and long-term contracts from buyers.
Indeed, Bangladesh’s efforts to promote green and sustainable finance have positioned the country as a potential pioneer in this field. Bangladesh Bank aims to continue supporting climate-smart investments that mitigate and adapt to climate change risks.
Credit: The Star : News Feed
