Sustainable Lending by Banks in Bangladesh Jumps Amid Climate Focus

Banks in Bangladesh have rapidly scaled up sustainable financing, with disbursements rising by nearly 40 percent in the first quarter of 2023 compared to the same period last year.

According to data from the Bangladesh Bank’s latest Quarterly Review Report, sustainable loans provided by banks amounted to Tk 35,387 crore between January to March 2023. This represents a significant jump from Tk 25,290 crore in Q1 2022. 

The central bank introduced sustainable finance frameworks in 2020 to encourage banks and financial institutions to integrate environmental and social responsibility into lending decisions. Sustainable loans now account for 13.77 percent of total loans, up from 8.04 percent in 2021.

“Sustainable finance is crucial for ensuring future development is ecologically sound. Banks can accelerate the movement towards a clean world through their financing,” said a Bangladesh Bank spokesperson. 

Green financing saw an even sharper 65 percent year-on-year rise, from Tk 1,689 crore in Q1 2022 to Tk 2,775 crore in Q1 2023. While lower than the previous quarter, the growth reinforces Bangladesh’s commitments under the Paris Climate Agreement.

Rajshahi Krishi Unnayan Bank topped green financing attainments at 64.57 percent of total lending. Leading private banks like Exim Bank, Shahjalal Islami Bank and Shimanto Bank also exceeded the central bank’s 5 percent target.

Experts have lauded the efforts, but cautioned that oversight is needed to ensure funds are reaching truly eco-friendly initiatives. “Sustainable lending norms cannot remain only on paper. The impacts must be monitored,” said prominent economist Dr. Bazlul Haque.

With Bangladesh facing climate vulnerabilities, analyst Jalal Uddin noted, “Banks are crucial to supporting businesses that limit environmental damage. This will ultimately benefit the economy.”

The Q1 figures provide promising signs that banks are aligning operations with sustainability, despite pandemic impacts. However, environmentalists emphasize that the nation still has far to go to finance the green transition.