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Investing in Renewable energy: A snapshot of Bangladesh Bank’s refinancing scheme

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Jul 12, 2013

Bangladesh Bank recently has announced a revolving fund of 200 corer taka, which is generated from its own sources, to make easy finance on “Renewable energy & Environmental Friendly” sectors. It has already been notified to the other commercial banks to give easy loan in this regard- mainly in “Solar Energy”, Bio-gas” and “Effluent Treatment Plant”. This is an effort to boost investment in clean energy and tackle continuously growing environmental concern.

Here goes a quick review on the refinancing process and on other related issues:

1. Area of the Scheme:

Location: The urban and rural areas of Bangladesh.

Focus & Specification: Main focus is on “Households and Business Enterprise” to set Solar Energy Panel, Solar Photovoltaic Plant, Bio-gas Plant and Effluent Treatment Plant etc.

2. Sectors: The scheme is allowed for three different sectors

a) Solar Energy
b) Bio-gas
c) Effluent Treatment Plant.

A) Solar Energy:

If individual sets solar panel in his/her individual/joint apartments, business enterprise, cooperative societies or for familial purpose to generate electricity by taking the finance from banks in urban/rural areas, he/she will be able to get re-finance from this scheme.

The following sub-sectors will also be granted under this scheme:

• Solar Home System
• Solar Mini Grid
• Solar Irrigation Pumping System
• Solar Photovoltaic Assembly Plant

The Capacity of Solar System: It ranges from 10Wp to 50KWp.

Loan Range: Loan ranges from 10,000-6, 00, 00,000 taka.

The Eligible entities:

• Single/Joint Family,
• Business Enterprise,
• Cooperative Societies

Interest Rate for Loan Holder:

• If Banks/Financial institutions provide loan directly to the consumers, interest rate will range from 8%-9%.
• If Banks/Financial institutions provide MFI linkage, interest rate will range from 11-12%.

Loan Payment Period & Interest Calculation:
Loan payment time ranges from 4 years to 10 years highest. Interest must be calculated in reducing balance method.

Re-financial Loan Payment Period:
Re-financial loan payment period ranges from 6 months lowest to 10 years highest.

Debt-Equity Ratio:
It will be based on the banker-consumer relationship.

B) Bio-Gas:

If loan is taken from banks to produce and use bio-gas in rural and urban areas, then the re-financial scheme will be applicable in this regard.

The following sub-sectors will be granted under this scheme:

• To Set Bio-gas Plant in Existing Cattle/Poultry Firm
• Combined Cattle Rearing & To Set Bio-gas Plant
• To Produce Organic Fertilizer from Slurry
• To Set Medium Bio-gas Plant

Loan Range:
Loan ranges from 25,000-25, 00,000 taka.

The Eligible entities:
Single/Joint Family/ Enterprise is eligible to get loan.

Debt-Equity Ratio:
It will be based on the banker-consumer relationship.

Interest Rate for Loan Holder:

• If Banks/Financial institutions provide loan directly to the consumers, interest rate will be 9%.
• If Banks/Financial institutions provide MFI linkage, interest rate will be 11%.

Loan Payment Period & Interest Calculation:
Loan payment time ranges from 3 months lowest to 5 years highest. Interest must be calculated in reducing balance method.

Re-financial Loan Payment Period:
Re-financial loan payment period ranges from 6 months lowest to 5 years highest.

C) Effluent Treatment Plant:

According to Environment Preservation Rules-1997, those industrial factories that produce liquid wastage during production process, they must be set up effluent treatment plant. Only these types of industrial factories will be eligible for this re-financial scheme.

The following sub-sectors will also be granted under this scheme:

• To Set Up Biologic ETP
• Combined Technology of Biological & Chemical to Set ETP
• Chemical ETP Transformation

Production Capacity of the Factory:
It will be lowest 5 ton to 10 ton highest per day.

Purification Capacity of ETP:
It ranges from lowest 500CM to 2,500CM.

Loan Range:

a)To Set Up Biologic ETP: Highest Four (4) Corers Taka
b) Combined Technology of Biological & Chemical to Set ETP: Highest Two (2) Corer s Taka
c) Chemical ETP Transformation: Highest One (1) Corer Taka

The Eligibility to get Loan:
Factories which produce liquid wastage according to Environment Preservation Rules-1997

Debt-Equity Ratio:
It will be based on the banker-consumer relationship.

Interest Rate for Loan Holder:
Interest rate will be highest 9%.

Loan Payment Period & Interest Calculation:
Loan payment time ranges from 6 months gross period to 5 years highest. Interest must be calculated in reducing balance method.

Re-financial Loan Payment Period:
Re-financial loan payment time ranges from 6 months gross period to 5 years highest.

Project Completion:
Within six months after taking the first loan installment, ETP must be set up and it is also confirmed by bank/financial institution.

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