AIIB gives $200 million loan to Bangladesh to develop renewable energy

Bangladesh has got a long term credit facility of $200 million from the Asian Infrastructure Investment Bank (AIIB) to develop a range of infrastructure projects top of which stands renewable energy expansion in the country. The renewable energy and electricity infrastructure improvement is to ensure optimal power supplies throughout Bangladesh. The official statement from the Bangladesh Government says that a loan agreement was signed by Economic Relations Division (ERD) under Ministry of Finance on 26 April.

As per the details of the financial facility from AIIB, Bangladesh will have to repay the loan amount in 18 years. There will also be a five year grace period. There will be a fee of 0.25% and a 0.25% commitment fee annually for the part which is not withdrawn. AIIB has kept the interest rate at 0.60%. There will also be levied variable borrowing cost margin AIIB.

The state owned investor of Bangladesh called Infrastructure Development Co. Ltd. (IDCOL), will disburse the money for the development of renewable energy, energy efficiency, and social infrastructure projects. The IDCOL borrows funds from the Bangladeshi government and international players and offers low-cost loans to renewable energy developers.

IDCOL promotes both large solar power projects and also rooftop solar installations. Most rooftop installations come up on the top of apparel factories – the economic power houses of Bangladesh. IDCOL will be providing finance for the deployment of 300 MWp of rooftop solar installations by the end of 2022 in Bangladesh.

Bangladesh is aiming to focus primarily on electrification of the country and full time power supply in order to give thrust to its rapid industrialisation and urbanisation. Bangladesh is the fastest growing economy of South East Asia in the recent years. But the travesty is that almost 22% of its population still lack access to electricity. According to some estimates, the inconsistent power supply has causes about 2 to 3 per cent of DGP loss every year.

Bangladesh is presently generating about 787 MW of renewable energy. The solar power projects have a major role as they produce 553 MW of energy. Bangladesh has aimed at producing 40% of its total electricity from renewables by 2041.