Green funds must prioritise SMEs

At a time when the government urges industries to go green and reduce reliance on fossil fuels, small and medium-sized entrepreneurs willing to invest in renewable energy are being trapped in endless delays, paperwork, and silence from banks. The Tk 10,000 crore Green Transformation Fund (GTF) was created to support such initiatives, yet for many SMEs, the fund exists only on paper. While financing mechanisms are in place and banks are enrolled, loan disbursement remains sluggish, with large portions of the fund untouched.

Reportedly, excessive documentation requirements, rigid equity thresholds, and bureaucratic barriers, including the absence of accountability for banks, have made access to green finance very difficult for smaller firms. The story of Humayun Kabir Salim makes the situation painfully clear. Seeking to install a 1-megawatt rooftop solar system at his textile factory, he approached several banks for financing under an existing government-backed scheme. None rejected his proposal outright, but repeated demands for documents and prolonged delays left the process stalled indefinitely. Eventually, Salim was forced to abandon the effort.

There are also allegations that political pressure, relaxed risk assessments, and regulatory bias allowed powerful companies to obtain green financing, while smaller firms were left behind. For instance, many influential business groups including the S Alam Group and its subsidiaries have accessed large sums from the same fund with ease. Many of these companies later defaulted on their loans, leaving banks burdened with losses.

Climate-linked funds are failing to deliver their intended benefits and defaults are weakening the banking sector. While public funds meant to support sustainable growth are misallocated, the cost of failure is ultimately borne by depositors and the economy. Equally concerning is Bangladesh Bank’s (BB) position that it bears no financial strain because commercial banks must absorb the losses under the refinancing model. This arrangement discourages banks from supporting SMEs.

To make the GTF truly effective, urgent reforms are needed. BB must employ an oversight mechanism to ensure that green financing delivers real environmental and economic benefits. It must simplify lending procedures, enforce strict timelines for disbursement, and ensure transparency at every stage of approval. Political influence and regulatory bias must be eliminated, and banks should be held accountable for fair and timely lending to SMEs. The government should also earmark a significant portion of green funds for SMEs and innovators, while providing support such as partial equity grants or low-interest loans. Only through such measures can the government ensure that our green transition is equitable, effective, and sustainable.