GBCSRD Circular Letter No. 02: Bangladesh Bank's Refinance Scheme for Green Finance

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Department: GBCSRD
Green Banking & CSR Department
Bangladesh Bank
Head Office
Dhaka.
August 18, 2014
GBCSRD Circular Letter No.: 02 Date: ----------------- Bhadra 03, 1421 Managing Director / Chief Executive Officer All Scheduled Banks and Financial Institutions operating in Bangladesh.
Dear Sir,
Refinance Scheme for Renewable Energy and Environmentally Friendly Non-Energy Sectors (REREFNES).
Reference is invited to GBCSRD Circular No. 02 dated July 01, 2013 and GBCSRD Circular Letter No. 01 dated May 20, 2014 on the subject cited above.
Under the aforementioned Circular and Circular Letter, refinance facilities are being provided for 44 products across 9 sectors under the 'Refinance Scheme for Renewable Energy and Environmentally Friendly Non-Energy Sectors'. To expand the scope of the scheme, 3 additional products have been included in the existing refinance scheme alongside the current 44 products. Maximum loan limits for the 3 new products covered under the scheme:
Sector Sub-sector Product Loan Limit
(To be determined based on production capacity and actual cost; however, it shall not exceed the following limits per project)

1. Renewable Energy: Surface water extraction via Solar Pump and Purification Supply Project 3,00,00,000/00 (Three Crore) Taka

2. Green Industry: Establishment of Green Industry 20,00,00,000/00 (Two Hundred Crore) Taka

3. Ensuring Factory Environment and Safety: Ensuring environment and safety of workers in Garment and Apparel Industry factories 1,00,00,000/00 (One Crore) Taka

4. Renewable Energy (Renewable Energy)
   1.1 Surface water extraction via Solar Pump and Purification Supply Project:
   Due to the increased use of groundwater, the water level is dropping. This problem is becoming more acute with the passage of time. Increased use of surface water is the only way to prevent this crisis. In this context, refinance facilities will be provided in this sector to establish projects for extracting surface water using solar-powered pumps and supplying purified water for public health protection and preventing environmental crises. A maximum refinance facility of 3.00 (Three Crore) Taka will be provided for such projects. (a) Loan Limit: Up to 3,00,00,000/00 (Three Crore) Taka depending on the capacity of the solar panel. (b) Minimum Eligibility for Loan Receipt: Cooperative Committee formed by beneficiaries/Joint/Single basis user family/Institution or Institution registered with Registrar of Joint Stock Companies and Firms (RJSC); Registered NGO of BMB; however, they must ensure the protection of beneficiaries' interests and transfer the ownership of the project to the Cooperative Committee formed by beneficiaries at the end of the loan period. Continued on Page No: 02

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(c) Customer Interest Rate:
In the case of direct lending by Bank/Financial Institution {to Cooperative Committee formed by beneficiaries/Joint/Single basis user family/Institution/Registered NGO of BMB}, the maximum rate is 9% [Current Bank Rate (currently 5%) + Maximum 4%].
In the case of lending to customers through MFI (Registered NGO of BMB) linked Medium Wholesaleing, the maximum rate is 11% [Current Bank Rate (currently 5%) + Maximum 6%], provided that the concerned Bank/Financial Institution is responsible for selecting the relevant NGO, distributing loans, collection, and proper use of loans. In the case of lending by Bank/Financial Institution, if a company/Institution is used as an agent/intermediary for customer selection, loan proposal preparation, evaluation, monitoring, collection, etc., the maximum rate is 11% [Current Bank Rate (currently 5%) + Maximum 6%]. (d) Customer Loan Repayment Period and Interest Calculation: Interest and principal are repayable within a maximum of 10 (ten) years including a 9 (nine) months grace period from the date of loan receipt, and installments are collectible on a monthly/quarterly basis. Interest shall be calculated on a reducing balance basis (Reducing Balance Method). (e) Refinanced Loan Repayment Period: Interest and principal are repayable within a maximum of 10 (ten) years including a maximum 9 (nine) months grace period on a quarterly basis from the date of refinance receipt. (f) Scope of Loan: Local cost of the project + Import cost + Civil & Works + Solar Panel + Solar Pump + Underground Pipe. (g) Loan to Equity Ratio: To be determined based on Banker-Customer relationship.

2. Green Industry (Green Industry)
   2.1 Green Industry (Green Industry):
   It is possible to ensure the maximum use of natural light, air, water, and energy-saving/efficient technology, as well as the protection of the working environment for workers, through the establishment of 'Green Industry'. The expansion of this sector is in the interest of providing refinance facilities at a slightly affordable cost through the use of such integrated technology. However, since no government directive/circular regarding Green Industry/Building has been issued so far, the project constructed by the 'Bangladesh Green Building Council (BGB)' under the 'Green Building Rating System' shall be accepted as 'Green Industry' temporarily. After the issuance of government directives/circulars, the said government directives shall be followed. (a) Scope of Loan: Local cost of the project + Import cost + Works (Works). (b) Minimum Eligibility for Loan Receipt: Institution registered with Registrar of Joint Stock Companies and Firms (RJSC), Single/Joint ownership institutions. (c) Loan Limit: The refinance limit shall be determined after determining the production capacity of the project and its actual cost, but it shall not exceed 20,00,00,000/00 (Two Hundred Crore) Taka. (d) Customer Interest Rate: Maximum 9% [Current Bank Rate (currently 5%) + Maximum 4%] Continued on Page No: 03

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(e) Customer Loan Repayment Period and Interest Calculation: Interest and principal are repayable within a maximum of 6 (six) years including a 9 (nine) months grace period from the date of loan receipt, and installments are collectible on a quarterly basis. (f) Refinanced Loan Repayment Period: Interest and principal are repayable within a maximum of 6 (six) years on a quarterly basis including a 9 (nine) months grace period from the date of refinance receipt. (g) Loan to Equity Ratio: To be determined based on Banker-Customer relationship.

3. Ensuring Factory Environment and Safety:
   3.1 Ensuring Factory Environment and Safety:
   Refinance facilities will be provided to ready-made garment, knitwear, and textile industry institutions that are members of the Accord on Fire and Building Safety in Bangladesh (AFBSB), the Alliance for Bangladesh Worker Safety (ABWS), and the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), and which have their own factories, for renovation, reconstruction, and replacement work including the construction of a safe factory environment, fire extinguishing materials, fire prevention materials, roof, and water reservoirs along with the required number of pumps underground. a) Scope of Loan: Expenditure incurred in compliance with existing laws and rules regarding the safe environment of the factory {Local cost of the project + Import cost + Works (Works)} will come under the refinance facility. b) Minimum Eligibility for Loan Receipt: Institution registered with Registrar of Joint Stock Companies and Firms (RJSC), Single/Joint ownership institutions. However, the institution must be a member of AFBSB, ABWS, or BGMEA. (c) Loan Limit: The refinance limit shall be determined after determining the actual cost, but it shall not exceed 1,00,00,000/00 (One Crore) Taka per single loan recipient. (d) Customer Interest Rate: Maximum 9% [Current Bank Rate (currently 5%) + Maximum 4%] (e) Customer Loan Repayment Period and Interest Calculation: Interest and principal are repayable within a maximum of 5 (five) years including a 9 (nine) months grace period from the date of loan receipt, and installments are collectible on a quarterly basis. (f) Refinanced Loan Repayment Period: Interest and principal are repayable within a maximum of 5 (five) years on a quarterly basis including a 9 (nine) months grace period from the date of refinance receipt. (g) Loan to Equity Ratio: To be determined based on Banker-Customer relationship.

Other Instructions: Customer interest calculation, eligibility for refinance receipt, proper use of loans and information supply, collection, and special safeguards shall be implemented in accordance with the instructions mentioned in GBCSRD Circular No. 02/2013. The aforementioned clauses have been incorporated into the previously executed Participation Agreements (Participation Agreement) of the Participation Loans with Bangladesh Bank. These instructions shall be implemented immediately. Kindly acknowledge receipt. Yours faithfully, (Khandkar Morshed Millanat) Deputy General Manager Phone: 9530292 Fax: 9530327 E-mail: sdcngb.csr@bb.org.bd