22. Green Finance in Bangladesh

This chapter provides an overview of Bangladesh’s green financing status, with a focus on the renewable energy (RE) sector, particularly the potential for and the impediments to expanding RE projects. As a case study, this chapter analyzes various aspects of a successful solar home system (SHS) program, which the Infrastructure Development Company Limited (IDCOL) implemented, to understand the risks and potential of a renewable energy project. It also highlighted that though the Bangladesh Bank has formulated green banking guidelines, the lack of capacities of banks and financial institutions, the lack of a proper understanding of the risks and returns of green projects, and the underdeveloped equity and bond markets hamper the expected growth of green financing in Bangladesh. Therefore, this chapter suggests that the capacity building of banks and financial institutions, the development of bond and equity markets, a well-coordinated policy oversight body and appropriate incentive structure for the private sector are some key policy issues that Bangladesh needs to address to promote green projects and achieve sustainable development.