GREEN FINANCING - ECOLEBAN...green initiatives. To further fortify the financing arrangement under GTF, it has been defined a Participation Agreement to be signed between Bangladesh

Implementation of environmental management

systems and eco‐labelling schemes in the SMEs of

the leather sector in Bangladesh

This project is funded by The European Union

GREEN FINANCING

2

SENSITIZATION CAMPAIGN

Implementation of environmental management systems and eco‐labelling schemes in the SMEs of


The ECOLEBAN Project, funded by the European Commission under the Switch Asia Programme, has an overall duration of 48 months (from March 2014 to February 2018).

The overall objective of the ECOLEBAN Project is to enhance the resource efficien-cy and sustainability of the leather sector in Bangladesh throughout the whole value chain of the leather related products such as footwear and other leather goods.

The following picture shows the expected results of the action as well as the activi-

ties scheduled to achieve them:

The Bangladeshi leather sector is dominated by SMEs with lack of Access to long-term finances and other incentives that would create conducive business environ-ment to adopt sustainability practices. This may eventually affect their competitive-

ness in the international markets, where sustainability has become an important re-quirement for the business viability.

The main objective of Result 3 of the action is to engange financial institutions in sustainability aspects so as to facilitate the access of the leather sector SMEs to

GREEN FINANCING.

3



GREEN FINANCING

Green finance is a phenomenon that combines the world of finance and

business with environmentally friendly behavior, and it can refer to financial investments flowing into sustainable development projects and initiatives, environmental products, and policies that encourage the development of a

more sustainable economy.

Green finance includes climate finance but is not limited to it. It also refers to

a wider range of other environmental objectives, for example industrial pollution control, water sanitation, or biodiversity protection.

Source: German Development Institute

Financial Institutions should support economic growth to realize affluent society under environment constraint. Balancing economy and environment

is crucial.

Green financing is essential to ensure the sustainability of the territory.

4


GREEN TRANSFORMATION FUND (GTF)

Green Transformation Fund (GTF) was established on January 14, 2016, by the Bangladesh Bank, and

it aims at financing all manufacturer-exporters in textile and leather manufacturing sectors, to import

capital machinery and accessories for implementing green initiatives.

To further fortify the financing arrangement under GTF, it has been defined a

Participation Agreement to be signed between Bangladesh Bank and intended Authorized Dealers (AD).

Revolving fund of USD 200 milion!!

• Tenor of the loans: 5 to 10 years with 1 year grace period.

• The GTF will be managed by Forex Reserve and Treasury Management

Department (FRTMD) at the head office of BB.

• Sustainable Finance Department (SFD) of BB will approve application of

loan from Authorized Dealers (AD) and monitor the utilization of the

lending to the borrowers as well as end-use of the financing.



5





Eligibility criteria for participating Authorized Dealers (AD):

NPL not more than 10 (ten) percent;

No shortfall in loan/investment provision, capital and liquidity;

Should have qualified and experienced management;

Should have appropriate capacity for carrying out loan appraisal.

Responsibilities of Authorized Dealers in the lending process:

Shall bear all risks associated with the financing;

Shall maintain due diligence in selecting borrowers

and conduct standard project appraisal process; Shall ensure compliance of Environmental Risk

Management (ERM) Guidelines; ADs shall not allow this facility to the enterprises

owned by their Board Members;

Shall observe instructions of Import Policy Order in force, and the

Guidelines for Foreign Exchange Transactions-2009;

Shall submit quarterly statements to FRTMD with copy to SFD by the

second week of the end of each quarter;

ADs shall submit compliance report periodically to SFD on Environment

& Social Safeguard Standard of the project.

6



Eligibility of loans from the Fund:

The loans from the GTF will be used for payment of imports.

Loan defaulters in banking will not be eligible for financing from the

Fund.

Re-financing from the Fund against loans disbursed before issuance of

this circular will not be permissible.

Pricing:

Six-month USD LIBOR plus 2.25 percent, plus a reasonable risk-adjusted

spread and profit margin (Typically expected to be in the range of 1.00 ~ 2.50).

The above pricing will be reviewed and adjusted every six month

depending on market conditions.

Guiding principles:

For endorsing the Green Initiatives as ‘green transformation’, applicant

banks will use the guidance note to be issued by SFD.

Till the issuance of the guidance note, the decision regarding the

transformation will be made by SFD.



7



Procedure of application for GTF loan from BB :

1. Head office/principal office of ADs shall submit loan application (as per

Annexure-I) to SFD.

2. SFD will scrutinize the application and dispose of with decision.

3. The decision will be communicated simultaneously to FRTMD and applicant

AD.

4. On receipt of approval from SFD, FRTMD will sanction the loan and disburse

as per schedule by credit to FC clearing account of AD with BB.

Repayment:

Shall be repaid on quarterly installments.

A repayment schedule will be prepared by ADs within 7 working days

from the first drawdown from the Fund.

The repayment of the financing will start after a certain grace period

The grace period, will be determined by ADs.

ADs shall submit Promissory Notes as well as a debit authority to BB

along with the loan application.

The due installments will be recovered from FC clearing accounts.

If adequate fund is not available in FC clearing account the equivalent

Taka will be debited from the respective current account.

In case of unavailability of funds in both accounts, BB will charge a penal

interest on such dues at a rate 2% above the repo rate.



8



In the framework of a forum organized by ECOLEBAN Team (March 29th 2016), the

GREEN TRANSFORMATION FUND was presented by Mr. Rizwanul Karim,

Assistant Director of the Sustainable Finance Department of the Bangladesh

Bank.

ECOLEBAN Team will keep on

working with financial institution and

SMEs in order to strengthen links

between them, and encourage

financial institutions to facilitate

funding access to leather sector

SMEs for investments related to the

implementation of Sustainable

Consumption and Production (SCP)

practices.



9



ECOLEBAN Team invites all the financial institutions that have already

collaborated with the project to be updated regarding Green Transforma-

tion Fund, and to assess this opportunity and other green loan alternatives

in order to facilitate the financing required for the implementation of SCP

practices in the leather sector in Bangladesh.

Learn more about our project visiting our website

www.ecoleban.com

This document has been produced with the financial assistance of the European Union. The contents of

this document are the sole responsibility of the consortium and can under no circumstances be regarded

as reflecting the position of the European Union.


Documents

GREEN FINANCING - ECOLEBAN...green initiatives. To further fortify the financing arrangement under GTF, it has been defined a Participation Agreement to be signed between Bangladesh