Bangladesh has introduced a US$218.7m  (€200m) Green Transformation Fund (GTF) to provide soft loans to solar developers, other environment-friendly products and Eurozone’s energy efficiency components’ importers. This is in addition to the existing US$200m fund to offer soft loans for dollar-denominated imports, says GlobalData, a leading data and analytics company.

Somik Das, Senior Power Analyst at GlobalData, comments: “The decision to introduce a fund was taken to support the developers and importers better-access to finance with low interest. The sectors covered under this fund are renewable energy and energy efficiency, water conservation and management, waste management, resource efficiency and recycling.

“Access to low interest loans will be a much needed relief, especially post-COVID-19 as projects may be delayed due to liquidity and supply chain issues. Soft loans will be of great significance as renewable companies (developers and importers) get access to funds at lower interest rates, which may help them to sail through the difficult times.”

However, the 3% margin (1% by central bank and 2% by authorized lender) covered by the lender and central agency in post-COVID market scenario may not give complete relief to the developers who are already facing a lot of adverse market conditions.

It is expected that equipment costs will be higher due to the supply chain issues and this may result in higher upfront costs than earlier. The lower interest rates offered under GTF may not be able to offset the impact of increased equipment costs.

Das concludes: “The Central Bank and authorized lenders may closely follow the after-effects of the pandemic and reduce their margins if needed, to be able to provide any further relief necessary to the industry borrowers. This will help in the rebound of not just the industry in particular but the economy as a whole.”