Green Finance Projects in Bangladesh

Green Products/Projects/Initiatives (GPPI)

Refinancing schemes for environment-friendly green products, projects, and initiatives are financial programs designed to support and promote sustainable development. These schemes typically provide favorable loan terms to individuals, businesses, and organizations that undertake green initiatives.

Key Features of the GPPI Scheme

1. Objective of the Fund: Acceleration of financing to Eco-friendly Green Products/ Projects/ Initiatives
2. Interest Rate of the Loans: The Interest rate is at 5% to the customer level (PFI 1%). In case of Solar irrigation at 3%
3. Refinancing types of loan: Term Loan/Investment
4. Tenure of Loan: Duration 3-10 years (for Affordable Green Housing maximum 20 years)
5. Grace Period: Some cases maximum 1 year
6. Loan/Investment Amortization Schedule: Fixed Principal Payment Method
7. Debt-Equity Ratio 70 : 30

Documentary Checklist

1. Up to date CIB report
2. Sector wise expenditure of the project and authentic documents in its favour,
3. Project Profile
4. Project Inspection Report by Bank/Financial Institution (where applicable)
5. Factory Layout
6. Environmental clearance issued by the Department of Environment
7. Fire license issued by Fire Service and Civil Defense Authority
8. Factory License from Directorate of Factory and Establishment Inspection
9. Technical Report from Sustainable and Renewable Energy Development Authority (SREDA)
10. Directorate General of Health Services
11. Office of The Chief Inspector of Boilers
12. Other required certificates for the concerned product/enterprise/project (if applicable)
13. Any other documents as mentioned in the Circular

Important Links:

• SFD Circular No. 02: Refinance Scheme for Environment Friendly Products/Projects/Initiatives

Green Transformation Fund (GTF)

The Green Transformation Fund (GTF) in Bangladesh is a specialized financing mechanism aimed at promoting sustainable industrial practices and environmental conservation. The GTF focuses on encouraging industries to adopt green technologies and energy-efficient processes to reduce their environmental footprint. Here is an overview of the GTF process in Bangladesh:

Key Features of the GTF:

1. Objectives of the Fund: To facilitate purchase of green/eco-friendly capital Machinery and Equipment in export and manufacturing oriented industries
2. Interest Rate of the Loan: at 5% to the customer level (PFI 1%)
3. Tenure of Loan: Duration 5-10 Years (depending on the project's capacity)
4. Grace Period: Maximum 1 Year
5. Debt-Equity Ratio 70 : 30
6. Refinancing types of loan: Term Loan/Investment

Documentary Checklist

The following documents are to be submitted while applying for refinancing with Bangladesh Bank:

1. Customer's letter regarding taking loan/investment under refinancing facility;
2. Customer's updated CIB report
3. Project Profile and customer’s profile associated projects;
4. Energy Audit Report prepared by a certified Energy Auditor of Sustainable & Renewable Energy Development Authority (SREDA) to be submitted
5. Any other documents as mentioned in the Circular

Objectives of the GTF

To facilitate purchase of green/eco-friendly capital machinery and equipment in export and manufacturing oriented industries under the following initiatives and activities:

1. Water use efficiency in wet processing;
2. Water conservation and management;
3. Waste management;
4. Resource efficiency and recycling;
5. Renewable energy;
6. Energy efficiency;
7. Heat and Temperature management;
8. Air ventilation and circulation efficiency;
9. Work environment improvement initiatives;
10. Other areas as indicated by Bangladesh Bank from time to time

Eligibility for refinancing facility at Customer Level:

1. Under the initiatives mentioned in Objectives of the GTF, after payment of the import price of environmentally friendly capital equipment and parts, refinancing facility will be provided from this fund against bank financing or purchase of locally produced equipment and parts;
2. The debt equity ratio of a borrower under this fund shall be maximum 70:30. However, no single borrower will be entitled to a loan facility of more than Tk 200 (two hundred) crore under this fund;
3. Defaulting borrowers will not be considered for the refinancing facility. Before applying for refinancing facility updated CIB report from concerned institutions ensure that the customer is not in default;
4. Refinancing facility under this fund will not be considered if 2 consecutive Export Bills are fully or partially non-repatriated (up to the prescribed time as specified in Guidelines for Foreign Exchange Transactions-GFET) and
5. Due diligence should be done

Important Links:

• SFD Circular No. 07: Green Transformation Fund (GTF) in Taka for export and manufacturing-oriented industries

Technology Development/Up-gradation Fund (TDUF)

The Technology Development/Up-gradation Fund (TDUF) in Bangladesh is a significant initiative by the Bangladesh Bank aimed at enhancing the technological capabilities of export-oriented industries. This fund is part of a refinancing scheme designed to help businesses modernize their operations and remain competitive in the global market.

Key Features of the TDUF :

1. Object of the Scheme: To modernize the export-oriented industries along with technological development.
2. Beneficiaries of Fund: Highest Priority Sectors and Special Development Sectors under Export Policy 2018-2021.
3. Interest Rate of the Loan: at 2% - 3% to the customer level (PFI 1%)
4. Refinancing types of loan: Term Loan/Investment
5. Interest Calculation: Reducing balance method
6. Tenure of Loan: Duration 3-10 Years
7. Grace Period: Maximum 1 Year
8. Debt-Equity Ratio 70 : 30

Documentary Checklists

Following documents of the customer are to be presented:
1. Customer's updated CIB report;
2. Customer's letter regarding taking loan/investment under refinancing facility;
3. Customer's application for loan/investment;
4. Copy of the sanction letter;
5. Term Loan/Investment Agreement;
6. Repayment schedule of term loans/investments;
7. Updated Financial statement of loan/investment account;
8. Related expenditure statement and other documents;
9. Project Profile and customer profile of associated projects;
10. Technical report including estimated valuation/project cost evaluated expert Institute registered/approved by the concerned Ministry/Institution/Department of Govt. or experts from recognized universities of Bangladesh for industrial modernization and technological development by relevant sector and
11. Any other documents as mentioned in the Circular

Technology Development/Up-gradation Activities/Initiatives:

1. Main production machineries/technology of the concerned industry;
2. Energy efficient or renewable energy related machinery/technology;
3. Business Process Reengineering/Business Process Automation Machineries/Technologies;
4. Machinery/Technology related to Operations Management;
5. Waste Management Machineries/Technology;
6. Air handling machinery/technology;
7. Thermal Management Machineries/Technology;
8. Machinery/Technology related to work environment (fire management, health care) management;
9. Machinery/Technology related to water use management;
10. Modern technology related to human resource development and management and
11. Modern automation of accounting, inventory management, marketing, sales and security management processes Machineries/Technology.

Above 11 activities/initiatives from the list of 32 (thirty-two) highest priority and special development sectors mentioned in the Export Policy 2018-21 that will be considered for the funding.

Important Links:

• SFD Circular Letter No. 01: Refinance Fund for Technology Development/Up-gradation of Export Oriented Industries.
• Export Policy 2018-21 of Bangladesh