Bangladesh Bank sets a new target on banks’ green, sustainable financing.admin2019
To implement the plan of Bangladesh Bank to disburse bank loans in green and sustainable financing, the Sustainable Finance Department has issued a circular on Aug 04. According to the circular, the basis for setting annual targets will be accomplished by adhering to more specific deductions compared to the previous plan.
Sustainable finance involves making investment decisions that consider not only financial returns but also environmental, social, and governance factors. Often used interchangeably with “green finance”, it is a broad term with multiple definitions depending on context.
Green Finance is important as it promotes and supports the flow of financial instruments and related services towards the development and implementation of sustainable business models, investments, trade, economic, environmental and social projects and policies.
United Nations are also working on Green financing to achieve Sustainable Development Goals (SGDs). Because the capital allocation will shape the ecosystem and determine the patterns of consumption and production of tomorrow. Their main area of green financing development are:
· Supporting the public sector in creating enabling environment
· Promoting public-private partnerships on financing mechanisms such as green bonds
· Capacity building of community enterprises on micro-credit
Bangladesh is also working in line with that. According to the Sustainable Finance Policy published by the Central Bank, green finance should promote greener technology as well through its lending products in other sectors. Previously, the central bank said the annual target for eco-friendly financing would be determined on the basis of net outstanding and advance balance as of 31 December of the previous year.
Recently, Bangladesh bank has set new plans for loan disbursements in green and sustainable financing. The relevant department has issued a circular for banks in this regard on Wednesday.
This was a very wise decision to make use of the loan disbursements into green financing in the era of globalization. The government has supported the borrowers differently since the Covid pandemic stroke in the country.
According to the circular, the basis for setting annual targets for eco-friendly financing and sustainable financing will be determined by deducting employee loans, total classified loan and credit card loan from outstanding loan and advance balance based on Dec 31 of the previous year.
In order to make the plan successful, banks and financial institutions are asked to set up the ‘Dedicated Sustainable Finance Help Desk’ in their potential branches and conduct ‘Help desk’ activities with synchronization of their head office.