Bangladesh recently received $256.5 million from the UN Green Climate Fund (GCF) to promote private sector investment through large-scale adoption of energy-efficient technologies in the textile and garment sectors. The fund was approved at a GCF board meeting on November 13. The Infrastructure Development Company Ltd (IDCOL), as the direct access entity (DAE) of GCF, received the approval.
This is the first concessional credit line for Bangladesh and the first private sector financing from GCF in the country, IDCOL said. It is the largest approved funding proposal for any DAE of the GCF accredited globally, Idcol said in a press release.
GCF is a fund established within the framework of the United Nations Framework Convention on Climate Change as an operating entity of the financial mechanism to assist developing countries in adaptation and mitigation practices to counter climate change.
Under the programme, IDCOL will get $250 million concessional loan for 20 years with a grace period of five years for financing energy-efficient equipment.
Another $6.5 million will come as technical assistance to develop enabling environment by covering areas such as capacity building, awareness, support in loan disbursal and monitoring and evaluation of the programme parameters.
Out of $250 million loan, $100 million will be utilised to finance textile sector energy efficiency projects, while $150 million will be channeled to four local financial institutions for financing energy efficiency projects in the readymade garments sector.
The total programme size will be $423.50 million, including co-financing from IDCOL, local financiers and the project sponsors, IDCOL said.
The fund for the garment sector would be distributed through three banks and one non-bank financial institution.
Lenders would get the fund at a flat rate of 1.75 per cent for 20 years. Industries would get the loans at 4.75 per cent.
The Sustainable & Renewable Energy Development Authority is also implementing a component of the programme to strengthen the regulatory and institutional framework at the national level to overcome the operational constraints related to implementing energy efficiency and conservation in the country.
Presently, the industrial sector in Bangladesh accounts for 47.8 per cent of commercial energy consumption. Textile and readymade garments account for approximately 38 per cent of the total energy consumption in the industrial sector.
