Green and sustainable loan disbursement declines by 10% in March quarter

Infographics: TBS

Loan disbursement of banks and other financial institutions within the green and sustainable finance sector has declined by 10%, equivalent to Tk4,410 crore, during the March 2023 quarter than the previous quarter, according to a report from the Bangladesh Bank.

As per data from the central bank, loans disbursed within the sector during January-March 2023 totalled Tk36,694 crore. In the preceding quarter of December 2022 (October-December), the loan disbursement in this sector amounted to Tk41,104 crore.

During the March 2022 quarter, loan disbursement within the sector amounted to Tk26,149 crore.

Bankers have indicated that the overall investment has experienced a decline due to a liquidity crisis in banks and a slowdown in global economic activity. Consequently, investments in production sectors, including industrial factories, have dwindled, resulting in a decrease in the distribution of green finance and sustainable finance loans.

Sustainable Finance refers to the business conducted in such areas and in such a manner that helps the overall reduction of external carbon emissions and internal carbon footprint.

The managing director of a private bank said investments in the sustainable sector are particularly concentrated in industries. With the global economy experiencing a slowdown, the production and establishment of new factories have seen a decline. 

Furthermore, the reduction in capital machinery imports for the industrial sector has impacted the availability of credit, he added.

He pointed out that a liquidity shortage arose when banks acquired significant amounts of dollars due to rising import expenses. Moreover, there has been an overall decrease in demand for private-sector credit over the past year.

The central bank has issued directives mandating banks and financial institutions to allocate 5% of their total loans to green finance and 20% to sustainable financing.

While banks have successfully met the targeted disbursement for green finance, they have fallen short in the sustainable finance sector, trailing the target by 13.77% in the March 2023 quarter, data reveals.

According to the central bank report, industrial loans declined by Tk18,000 crore in the first three months of this year due to a slowdown in global economic recovery, ongoing political uncertainty, and lower imports of raw materials and capital machinery.

The import of raw materials and capital machinery dropped significantly in the last financial year, the data shows.