Effective participation of banks vital for renewable energy expansion

The banking sector's active engagement is crucial for expanding renewable energy in Bangladesh, according to participants at a workshop organised by Unnayan Shamannay. The workshop, titled "Renewable Energy Financing Trends in Bangladesh," highlighted that renewable energy constitutes only 4% of the country's current installed energy capacity. However, solar energy and other renewable sources could potentially meet 37% of Bangladesh's electricity demand by 2030.

The session, chaired by Dr. Atiur Rahman, former Governor of Bangladesh Bank and Emeritus Professor, brought together stakeholders from financial institutions and the renewable energy sector to discuss achievements, challenges, and possibilities in renewable energy financing.

In his opening remarks, Khondokar Morshed Millat, faculty member at BIBM, noted that banks' loan disbursement for renewable energy projects remains inadequate. Despite the significant investment required to achieve the government's target of generating 40% of energy from renewable sources, less than 10% of the necessary funding is expected to come from banks and NBFIs.

Representatives from major banks and financial institutions, including Brac Bank, Mercantile Bank, Jamuna Bank, Standard Bank, Al-Arafah Islami Bank, NBR Islami Bank, NCC Bank, and IPDC Finance, participated in the workshop. They expressed enthusiasm for renewable energy financing in line with Bangladesh Bank's green financing guidelines. However, they identified several key challenges. Low awareness among customers hampers demand, while vague regulatory guidance creates confusion for financial institutions. Limited incentives for entrepreneurs further deter investments, and inadequate measures to mitigate financial risks discourage banks from engaging in this sector. Additionally, the shortage of skilled manpower within banks undermines the capacity to manage renewable energy financing effectively.

Participants suggested that a collective forum or association of renewable energy entrepreneurs could bridge the gap between banks and entrepreneurs, enhancing coordination and outcomes.

Entrepreneurs from leading renewable energy organisations, including Rahimafrooz Solar, Bright Green Energy Foundation, Rural Services Foundation, Resource Development Foundation, Solaric, and the Institute for Energy Economics and Financial Analysis, highlighted additional barriers. They pointed to the high tax rates on renewable energy product imports, which hinder sector growth. They called for more effective initiatives by Bangladesh Bank to address loan accessibility challenges for renewable energy projects.

The workshop concluded with a collective call for financial institutions, policymakers, and entrepreneurs to strengthen collaboration and overcome the barriers to financing renewable energy. This would accelerate the transition towards a greener, more sustainable energy sector in Bangladesh.