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BB issues guideline for Shariah-based green financing

2014-10-13 22:28:35
BB issues guideline for Shariah-based green financing

Thereport24.com Desk, Dhaka:

Bangladesh Bank (BB) has issued a guideline for financing eco-friendly green projects, including renewable energy initiatives, by Shariah- based banks and non-banking financial institutions.

The central bank on Sunday in a circular asked all the Islamic banks and NBFI to finance renewable energy initiatives and other environment-friendly projects from the Shariah-based refinancing scheme of the BB.

Currently, seven Islamic banks and an Islamic NBFI are operating in the country.

Earlier on Thursday, BB issued a guideline for the refinancing scheme for Shariah-based funding with the particular aims of creating jobs in rural areas by helping the existing agro-based industries and creating new entrepreneurs. The size of the fund had not been finalized yet, but BB said it would be between Taka 100 crore and Taka 500 crore, depending on the demand.

The central bank in its latest circular advised the Islamic banks and NBFI to use to Islamic refinancing scheme for funding green projects.

The central bank has also set some conditions to the green financing including that the borrowers should have capital adequacy stipulated by BB when the banks and NBFI should maintain the single borrower exposure limit and take effective measures for risk management and prevent money laundering.

The banks and NBFI can lend 100 percent of their refinancing fund to the renewable energy and eco-friendly projects, but the projects should be selected from the current list of 47 products, prepared by BB. The timeframe for grace period and loan refund will also be set according to the directive of the central bank, given earlier in the list of 47 green products.

Under the new scheme, the Shariah-based banks and the financial institution would count Mudaraba profit rate against their received amount from the BB and the disbursed amount to the borrowers.

The circular also advised the interested Islamic banks and the financial institution to sign separate agreements with the BB's Green Banking and CSR Department to be the partners of the scheme.

Ends/thereport24.com/AMA/ Oct 13, 2014

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