Energy-efficiency projects hold more than five times as much outstanding green finance as renewable energy, exposing a widening mismatch between Bangladesh’s banking system and its clean-power ambitions.
Bangladesh’s banks and finance companies have built a green-finance portfolio worth more than Tk 77,000 crore, but only a small fraction of that money is financing renewable energy, raising questions over whether the country’s financial system is moving fast enough to support its energy transition.
An analysis of Bangladesh Bank data shows that outstanding green finance reached Tk 77,140.22 crore at the end of December 2025. Of this, Tk 31,931.42 crore, or 41.4 percent, was concentrated in energy and resource efficiency, while renewable energy accounted for only Tk 6,045.37 crore, or 7.84 percent.
That makes the outstanding energy-efficiency loan book 5.28 times larger than financing for renewables. Another 50.76 percent of the portfolio was distributed among other categories, including green buildings and establishments, liquid-waste management, circular-economy projects, green agriculture and environmentally friendly brick production.
The imbalance is significant because Bangladesh has set ambitious targets for renewable electricity. Under the Renewable Energy Policy 2025, renewables are supposed to meet 20 percent of power demand by 2030 and 30 percent by 2040. Yet a World Bank assessment published on July 22 this year put renewable energy’s share of national grid supply at only about 1.5 percent. The World Bank page does not specify the period covered by that percentage.
The figures expose a central challenge in Bangladesh’s green transition: the country has established policies, classifications and financial products for sustainable investment, but capital is still flowing disproportionately toward projects that fit conventional banking models rather than toward the renewable-power expansion required to meet national targets.
Green finance grows, but misses target
Bangladesh’s green-finance market has expanded sharply over the past several years.
Annual green-finance disbursement rose from Tk 7,232.85 crore in 2021 to Tk 30,653.78 crore in 2024, before slipping slightly to Tk 30,369.26 crore in 2025.
The 2025 figure was more than four times the amount disbursed in 2021. Yet it represented only 44.78 percent of Bangladesh Bank’s Tk 67,820.83 crore annual green-finance target for banks and finance companies.
Bangladesh Bank has progressively expanded its sustainable-finance framework since introducing green-banking guidelines in 2011. Its policy architecture now includes sustainable-finance targets, environmental and social risk management, green-bond rules, climate-risk guidelines and refinance facilities for environmentally friendly projects.
But the composition of the lending suggests that having a broad green taxonomy does not automatically direct capital toward renewable electricity.
Energy efficiency, for example, can include investments in more efficient industrial machinery, boilers and production systems. These investments can reduce energy consumption and emissions and are an important part of decarbonisation.
For lenders, however, they also offer another advantage: they are often loans to established companies with existing revenues, audited accounts, collateral and predictable cash flows.
Renewable-energy projects can present a different risk profile.
They may require longer repayment periods, depend on power-purchase agreements or other long-term revenue streams, face land and transmission constraints, and carry risks associated with currency movements, equipment imports and the financial condition of electricity buyers.
The result is a financial system that can classify both an efficient industrial machine and a solar-power project as green, but finds the former easier to finance.
Nearly tenfold gap in new lending in one quarter
The disparity was even larger in new green lending during the final three months of 2025.
Banks and finance companies disbursed Tk 3,453.76 crore for energy and resource efficiency during October to December, compared with just Tk 352.60 crore for renewable energy.
That represents a ratio of about 9.8 to one in favour of energy efficiency for the quarter. The figure should not be treated as a long-term trend because it covers only three months, but it illustrates how strongly lending can tilt toward efficiency projects.
Participation across the financial sector also remains uneven. Of Bangladesh’s 61 scheduled banks and 34 finance companies, only 40 banks and 10 finance companies reported green-finance exposure in the fourth quarter of 2025, according to Bangladesh Bank.
Energy analyst Shafiqul Alam of the Institute for Energy Economics and Financial Analysis, or IEEFA, has pointed to financing difficulties faced particularly by smaller renewable-energy borrowers.
“Financial institutions often do not have credit profiles for rural people interested in small-scale renewable-energy projects,” he told Renew Earth News.
IEEFA has separately identified high collateral requirements, small project sizes, currency risks, land constraints, policy uncertainty, power-buyer risk and cumbersome lending procedures as barriers to expanding renewable-energy investment in Bangladesh.
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Cheap refinance, but banks carry the risk first
Bangladesh Bank already provides concessional refinance facilities for environmentally friendly products and projects.
But the way refinance operates may itself discourage some lenders and borrowers.
Under the current structure examined by Renew Earth News, participating banks generally make the lending decision, provide the money and carry the repayment risk before seeking reimbursement from the central bank’s refinance facility.
That can make a small solar project less attractive from a bank’s administrative perspective than a much larger efficiency investment.
For illustration, if an efficiency project requires around Tk 100 crore while a rooftop-solar project requires Tk 10 crore, placing Tk 1,000 crore would require a bank to process about 10 large efficiency loans but around 100 rooftop-solar loans.
The example does not represent actual lending distribution, but it demonstrates how transaction costs and the number of appraisals can influence the choices lenders make.
Renewable-energy investors have also complained that uncertainty over the availability of refinance money can make investment decisions difficult.
The problem points toward a possible shift from reimbursement after lending toward mechanisms that provide greater certainty before equipment is purchased, such as conditional pre-approval or dedicated financing windows.
Renewable ambition far ahead of investment
The financing imbalance matters because Bangladesh faces a steep climb to meet its renewable-energy targets.
SREDA recorded 1,818.86 megawatts of installed renewable capacity, including off-grid systems, as of July 22, 2026. Bangladesh Power Development Board figures use a narrower definition and recorded 764 MW of grid-connected renewable capacity excluding hydropower as of June 30, 2025.
The figures should not be confused with electricity generation. Installed capacity measures what power systems are capable of producing, while the actual electricity delivered to consumers depends on how much those plants generate.
IEEFA estimates that Bangladesh could require between US$933 million and US$980 million in renewable-energy investment every year until 2030, rising to between US$1.37 billion and US$1.46 billion annually between 2031 and 2040.
By comparison, annual renewable investment averaged about US$238 million between 2018 and 2023, meaning the country may need to mobilise investment at roughly four to six times the historical pace.
Public money alone is unlikely to cover that requirement, making commercial banks, development institutions, private investors and international climate finance increasingly important.
Fixing the incentives
Experts argue that narrowing the financing gap will require more than increasing the headline volume of green lending.
A dedicated renewable-energy finance facility could prevent solar and other clean-power investments from competing with every other activity classified as green. Partial credit guarantees could reduce lender risk for borrowers unable to provide conventional collateral, while longer loan tenors could better match the operating life and cash flows of renewable assets.
Standardised power-purchase agreements, rooftop-solar contracts and project-appraisal procedures could also reduce transaction costs, while currency-risk and payment-security mechanisms could make larger projects more attractive to domestic and foreign investors.
IEEFA has similarly recommended dedicated low-cost renewable financing, greater use of pre-finance rather than refinance, credit guarantees and measures to address currency and off-taker risks.
Greater transparency is another concern. Bangladesh Bank reports lending and outstanding green finance, while SREDA and BPDB publish different measures of renewable-energy capacity. Those datasets do not yet provide a single picture linking finance disbursed to projects actually commissioned and electricity ultimately generated.
Bangladesh’s experience therefore shows that the size of a green-finance portfolio alone says little about the speed of an energy transition.
A bank loan that makes a factory more efficient can cut emissions and reduce energy use. But efficiency financing cannot substitute for the massive investment in solar and other renewable generation needed to transform the national electricity system.
With 41.4 percent of outstanding green finance concentrated in energy efficiency and only 7.84 percent in renewables, the Tk 77,140-crore green portfolio reveals how far financial incentives remain from Bangladesh’s stated power-sector ambitions.
The country’s green-finance architecture has grown rapidly. The next challenge is making sure the money follows the transition it was designed to support.
