Greener SMEs driving a stronger Bangladesh

Bangladesh is at a critical stage in its economic journey. Alongside strong GDP growth and major gains in poverty reduction, the country now faces the dual challenge of making this progress both inclusive and sustainable. This is not a task for large corporations alone. Small and Medium Enterprises (SMEs), employing more than 80% of the industrial workforce, remain the real drivers of transformation. By supporting SMEs to adopt greener practices, Bangladesh can build a more resilient and inclusive future.

Finance gap stalls progress

SMEs contribute significantly to GDP and livelihoods, yet their potential is being held back by lack of finance. The International Finance Corporation estimates a multi-billion-dollar SME lending gap, which prevents firms from upgrading technology, entering new markets, or investing in cleaner production. Closing this gap is both an economic and environmental necessity.

The case for going green

For SMEs, the benefits of sustainability are immediate. Energy efficiency cuts costs, waste reduction boosts productivity, and green inputs create export opportunities in markets demanding eco-friendly products. Small investments in renewable energy or efficiency upgrades often pay back within months. The challenge lies not in awareness, but in building an ecosystem that makes adoption easier.

Bangladesh Bank has already introduced green banking guidelines and risk management frameworks, while development partners such as IFC, World Bank and ADB are supporting reforms to improve credit guarantees and reduce capital costs. Together, these initiatives are gradually aligning the financial system with sustainability goals.

Barriers to overcome

Despite progress, SMEs still face steep collateral requirements, limited technical know-how and weak market incentives. Targeted procurement policies, stronger credit guarantees and accessible technical support are needed to help them make the transition.

Inclusion is vital. Policies must prioritise rural enterprises, women entrepreneurs and microbusinesses outside industrial hubs. Simple, mobile-friendly schemes can ensure small firms are not left behind.

Role of the private sector

Banks and corporates have a crucial role to play. Green loans with flexible terms, faster approvals and digital tools can make sustainability practical. Corporates can co-invest with suppliers to improve efficiency and strengthen value chains.

IPDC's example

IPDC Finance PLC has shown how inclusive products can meet economic, social and environmental goals. Its SME financing reached Tk24,203 million by December 2024, benefiting more than 74,800 businesses, with small firms now comprising nearly 35% of its portfolio.

Women-focused initiatives such as Joyee and Joyee360 have also expanded. Women entrepreneurs now account for 26% of SME assets, while the rural Joyee portfolio has tripled over five years. With an SME loan portfolio growing at 10.9% CAGR between 2020 and 2024, IPDC has set a benchmark for inclusive, sustainable growth.

Building the future

Investing in greener SMEs is not politics but sound economics. They are more resilient to climate shocks, more competitive and better positioned to safeguard livelihoods. Bangladesh's path to a low-carbon future will be built factory by factory, shop by shop. Policymakers, financiers and business leaders must now come together to prepare SMEs for that transition.