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Among them was S Alam Group, one of the country’s most influential conglomerates.
Two of its subsidiaries, Infinia Spinning Mills and Infinia Spinning Mills 2, jointly received $21.36 million and €3.3 million, or about $3.90 million, from Social Islami Bank Ltd at concessional interest rates under the GTF.
Another company owned by Belal Ahmed, the son-in-law of the S Alam Group chairman, also tapped the fund. Ahmed’s Unitex LPG Limited borrowed €12.6 million, or $14.90 million, from Islami Bank Bangladesh PLC in August 2021 under the same scheme.
Today, all of them are defaulters. The owners are reportedly abroad. The banks are left holding the losses.
Bankers allege the loans were approved under political pressure during the previous Awami League government, bypassing standard risk assessments and checks on project viability.
The Daily Star approached Belal Ahmed, but he could not be reached by phone.
“Belal sir is now staying abroad. We can’t talk about this issue,” an official of Unitex LPG Limited told The Daily Star.
As borrowers stopped repaying, the problem spread beyond individual banks.
“A special audit found that the two units of Infinia Spinning Mills alone owe several hundred crores to Social Islami Bank Ltd and have already defaulted,” according to a BB official, who asked not to be named.
“A case has been filed in this regard. Ultimately, they brought the bank into trouble,” said a senior official of Social Islami Bank Ltd.
“These were good firms once, but after the 2024 political changeover, their owners fled, and operations collapsed. We are trying to sell the companies to recover our funds, but we fear we would not get fair prices,” he said.
As defaults mounted, the BB stepped in.
According to Islami Bank Bangladesh PLC, the central bank deducted nearly €7.2 million, or $8.7 million, from the bank under its refinancing facility because of overdue payments linked to Unitex LPG Limited.
Islami Bank Managing Director Omar Faruk said the company defaulted after receiving the GTF loan in 2021.
“They are not making any repayment on that loan, so we will have to repay it ourselves by creating a new loan,” he said.
Asked whether political influence played a role, he said, “Of course, there was political influence.”
“The entire bank -- everything -- used to operate at their signal. There’s no scope to deny it. Bangladesh Bank would even lower the valuation and release the funds. It was effortless for them,” he said.
He added that the bank is now working with the BB to recover the money.
“Ultimately, we cannot leave BB’s money unrecovered. We may have to create a forced loan, impose the liability on them, and proceed with legal action. We have already initiated the process,” he said.
A case over the loan has already been filed.
‘FINANCIAL INJUSTICE’
Khondaker Golam Moazzem, research director of the Centre for Policy Dialogue (CPD), described the situation as “financial injustice’. “This is straightforward financial injustice as funds remain undisbursed and misused despite demand among SMEs.”.
“Because of this discrimination and misuse, the economy is being deprived of the benefits a functioning banking system should deliver. It is a systemic failure.”
He said the damage is twofold: climate-linked funds lose their intended environmental impact, and banks fall deeper into default.
“The cost of these defaulted loans is ultimately pushed onto depositors through higher interest rates,” Moazzem said.
M Zakir Hossain Khan, chief executive officer of the Change Initiative, a renewable energy think tank, said the structure of the fund itself needs rethinking.
He suggested shifting such funds from the Bangladesh Bank to the finance ministry and creating a dedicated annual startup fund, allowing innovators to access Tk 10 lakh to Tk 50 lakh without collateral based on merit.
Ideas, he said, should be pitched before expert panels rather than filtered through bureaucracy.
Zakir also proposed setting clear timelines so funds are released within three to six months, and earmarking 50 percent of funds for SMEs and CMSMEs, with at least 25 percent allocated to innovation every year.
COMMERCIAL BANKS ULTIMATELY BEAR THE BRUNT
The central bank does not acknowledge a default problem in the green fund.
In a written statement, BB spokesperson Arief Hossain Khan said, “The repayment of the instalments of the refinancing by the concerned banks is continuing.”
An official from the Sustainable Finance Department said that under the refinancing scheme, the central bank ultimately recovers its money from commercial banks.
“As a result, the central bank does not bear the financial strain, while commercial banks often find themselves in a critical situation,” he said.
On the lower disbursement, Shah Md Ahsan Habib, a professor at the Bangladesh Institute of Bank Management (BIBM), said constraints exist on both the demand and supply sides. On the demand side, entrepreneurs do not yet see a clear business case for green transformation.
He emphasised the need for two reforms: simplification and stronger incentives. “Simplification is necessary for any BB refinancing package, while incentives must be enhanced. The existing incentives, such as marginal tax reductions, are simply not enough,” he said.
On the supply side, Habib pointed to banks’ risk aversion and equity-related concerns.
He noted green financing remains largely experimental. “Default risks are uncertain, and these are not yet proven sectors, which makes banks particularly cautious,” he added.