IDCOL, as the Direct Access Entity (DAE) of Green Climate Fund (GCF), received approval of its first funding proposal for the programme titled “Promoting private sector investment through large scale adoption of energy saving technologies and equipment for Textile and Readymade Garment (RMG) sectors of Bangladesh”, reports.
The programme was approved in GCF Board Meeting-B.27 held on 10th November, 2020, a press release said Wednesday.
This is the first concessional GCF credit line for Bangladesh, as well as the first private sector financing of GCF in the country. So far, it is also the largest approved funding proposal for any Direct Access Entity (DAE) of GCF, accredited globally.
Congratulating IDCOL personnel on its success, chairman of the IDCOL board of directors and the National Designated Authority (NDA) of Bangladesh in GCF Fatima Yasmin expected IDCOL to be a national role model for developing climate change responsive commercial projects in the country.
She urged DAEs, Multilateral Implementing Entities (MIEs), and concerned ministries and divisions to explore the opportunities offered by GCF.
Presently, the industrial sector in Bangladesh accounts for 47.8 per cent of the commercial energy consumption. Among this textile and RMG accounts for about 38 per cent of the total energy consumption in the industrial sector.
The Energy Efficiency and Conservation Master Plan 2015 states that manufacturing industries in Bangladesh are not efficient in energy use because of continuous usage of old/mal-maintained machines and poor energy management. Major challenges in adoption of energy efficient technology are inadequate financial incentives and lack of technical expertise.
The objective of the approved programme is to provide concessional loans from GCF to finance energy saving technology and equipment for the textile & RMG sectors of Bangladesh in order to make it more affordable and accessible.
Under the programme, IDCOL will receive from GCF US$ 250 million concessional loan for 20 years with a grace period of 5 years for financing energy efficient equipment.
In addition to this, IDCOL will also receive US$ 6.50 million as technical assistance (grant) to develop enabling environment by covering areas such as capacity building, awareness, support in loan disbursal and monitoring and evaluation of the programme parameters.
Sustainable & Renewable Energy Development Authority (SREDA) is also implementing a component of the programme to strengthen regulatory and institutional framework at the national level to overcome the operational constraints related to implementing EE&C in the country.
Out of US$ 250 million loan, US$ 100 million will be utilised by IDCOL to finance textile sector energy efficiency projects, while US$ 150 million loan will be channeled to four local financial institutions for financing energy efficiency projects in the RMG sector. The total programme size will be US$ 423.50 million, including co-financing from IDCOL, local financiers and the project sponsors.
This programme is a remarkable success for IDCOL in terms of accessing climate change fund to pave the path for our country to achieve its Sustainable Development Goals (SDGs) especially SDG 7- affordable, reliable, sustainable and modern energy for all; SDG 9- sustainable industrialization and SDG 13- combating climate change. It will also support Government, in achieving the NDC conditional target to reduce GHG emissions by 15 percent below BAU levels by 2030 and also to achieve the target of 20 percent reduction of primary energy consumption per GDP by 2030 as per the Energy Efficiency and Conservation Master Plan 2015.
BGMEA president Rubana Huq congratulated IDCOL for getting approval of the funding.
She hoped that with access to such concessional financing, the adoption of energy efficient equipment will be much affordable for the garments owners and will further strengthen the competitive advantage of Bangladesh RMG sector.
Abdullah Al Mamun, vice president, BTMA, stated that approval of this fund will accelerate industrial growth to a sustainable direction, and will also allow a substantial number of industries to get the essence of global standard finance as an available option.
Executive director and CEO of IDCOL Mahmood Malik mentioned that this is just the beginning of a long journey and since IDCOL knows which direction to go, the bests are yet to come.