MD ASADUZ ZAMAN

Two years ago, Humayun Kabir Salim decided to follow the government’s long-standing call for factory owners: going green.

Salim, managing director of Khantex Composite Textiles Ltd, planned to install a 1-megawatt rooftop solar system, enough to power around 200 homes annually, at his factory in Dhaka. The project, estimated to cost around Tk 6 crore, was meant to cut rising energy costs and improve efficiency.

The technology was available. The policy support existed. And the money, on paper, was there.

What Salim could not get was a bank willing to say yes, or no.

The spinner approached four to five banks and financial institutions. None rejected the proposal outright. Instead, the process dragged on, with repeated demands for documents and compliance papers.

“There was no outright rejection, but the process kept getting delayed with repeated documentation requirements,” Salim said.

Over time, the delays took their toll. “People eventually stop chasing these projects,” he added.

The entrepreneur believes the problem is not with the banks alone, but with a system that allows them to avoid accountability.

“The government has set big renewable energy targets, but there is no follow-up or obligation for banks to finance a fixed share or explain why they do not,” he said.

Salim’s case was not an isolated one.

Across the country, many small and medium-sized entrepreneurs planning green factory projects have run into the same wall. Funds exist, demand is there, but disbursement has been painfully slow. In some cases, it is stalled altogether.

At the same time, some of the country’s most influential and politically connected business groups have had no such trouble accessing the Tk 10,000 crore refinancing fund. Its official name is the Green Transformation Fund (GTF), operated through the Bangladesh Bank (BB).

STRAIGHTFORWARD ON PAPER, SLOW IN PRACTICE

The GTF was launched by the BB in January 2016 as a long-term refinancing facility of $200 million, or Tk 2,443 crore. Its goal was to promote sustainable growth in export-oriented textile and leather sectors and support the country’s transition to a green economy.

In September 2019, the scope of the fund was expanded to include all manufacturer exporters, regardless of sector, for importing capital machinery and accessories for approved green and environmentally friendly initiatives.

Later, an additional €200 million, nearly Tk 3,000 crore, was added. In December 2022, another Tk 5,000 crore refinance fund was introduced to serve the same purpose.

Under the model, commercial banks lend to eligible factories or companies. The BB later reimburses the banks under the refinancing scheme.

According to central bank data, 30 banks signed participation agreements for the dollar component, and 26 did so for the euro component. Yet only 15 commercial banks have actually disbursed funds.

So far, more than 60 factories have received $140.94 million, or Tk 1,720 crore, and €71.21 million, or Tk 1,041 crore, representing 70 percent of the dollar allocation but only 36 percent of the euro allocation.

From the Tk 5,000 crore domestic currency fund, Tk 1,832 crore was disbursed to 68 clients through 20 banks as of June last year, about 37 percent of the total allocation.

Bankers say the lending process under the fund has become complicated because of its multiple components and other requirements.

Mercantile Bank, for example, distributed $8.9 million and €0.6 million to five recipients.

“The amount is affected because the higher formalities for GTF are stricter,” said a senior official of Mercantile Bank, who spoke on condition of anonymity.

Earlier, GTF funds were disbursed directly in dollars and euros, which he said was simpler. Now that the funds are provided in taka, customers must provide at least 30 percent equity, while banks can finance a maximum of 70 percent.

“Sometimes factories say they cannot provide more than 10 percent equity at the moment, so the bank’s fund cannot be fully disbursed,” the official said.

He added that environmental certification requirements have also reduced uptake, making compliance more challenging for factories.

NOT ALL CLIENTS ARE THE SAME

While small and mid-sized firms struggled with equity requirements, paperwork and delays, some politically connected companies got large sums with ease, according to bankers.