Greening MSME Growth in Bangladesh

In a world grappling with climate change and economic inequality, Bangladesh's private banks are emerging as vital champions of sustainable growth. Long dominated by public policies and development institutions, green finance is now increasingly being shaped by the private sector—particularly through the financing of micro, small, and medium enterprises (MSMEs).

This shift isn't just timely—it's transformational.

"In recent times, we have observed a noticeable shift in commercial banking toward SME-focused products," notes Professor Md Main Uddin of Dhaka University's Department of Banking & Insurance. "This transition is partly driven by the higher default risks often associated with large corporate loans."

Unlike big-ticket corporate lending, which often bypasses environmental considerations, MSME financing offers a chance to promote eco-friendly practices at the grassroots while simultaneously empowering low-income communities. Several banks are now pioneering loan products designed to be both inclusive and environmentally sustainable.

Eastern Bank (EBL), for example, is aligning its SME lending with environmental priorities. "We are deeply committed to fostering a green and sustainable business environment for MSMEs," says Md Shabu Munshi, Senior Vice President and Head of Asset, SME & Regulatory Reporting at EBL.

According to him, 60–70% of EBL's SME financing supports trading, while 30–40% goes to manufacturing and service-based enterprises. However, the bank actively avoids financing environmentally hazardous industries—such as tanneries, rubber, plastic, and certain types of footwear production—classified under red and orange risk categories.

Instead, EBL is prioritising sectors like garments, jute, hosiery, textiles, and paper cutting. One of their standout products is EBL Utkarsha, which offers need-based, collateral-free loans to support small enterprises with green aspirations.

City Bank is another frontrunner. The bank has received the Bangladesh Bank's Green and Sustainable Bank award four years in a row—a testament to its ongoing efforts. "Our SME Unsecured Loan product offers up to BDT 1.5 crore without requiring any collateral," says Kamrul Mehedi, Head of Small, Microfinance, and Agent Banking.

The product is designed to support sectors such as fisheries, livestock, agro-processing, agricultural equipment, diagnostic centres, rice mills, furniture, and Ayurvedic ventures—areas that combine economic inclusion with environmental stewardship.

At Trust Bank, the green agenda is taking root in the form of renewable energy financing. "We are quite concerned about sustainability and environmental impact," says Sadat Ahmad Khan, Senior Vice President and Head of SME Division. The bank's "Trust Power" product facilitates investment in small-scale solar solutions for homes and commercial use, with the potential to scale into larger irrigation projects.

Trust Bank has also financed over 1,000 biogas plants and introduced Trust Shufola, a product that targets green industries, brick kilns using improved technology, and effluent treatment systems—offering a lifeline to pollution-heavy sectors looking to transition.

Meanwhile, BRAC Bank continues to lead from the front. "We empower SMEs with sustainable financing aligned with Bangladesh Bank's green banking guidelines," says Syed Abdul Momen, Additional Managing Director and Head of SME Banking. The bank's portfolio includes support for waste management, water conservation, energy efficiency, and sustainable infrastructure.

BRAC Bank stands out for its integration of technology. Its digital loan products, such as Shafollo and Jibika, are fully paperless—helping reduce deforestation. Platforms like ASTHA, bKash repayments, and 24/7 Cash Management reduce branch visits and transport-related emissions, while tools like eLAP (Digital Loan Origination System) and digital onboarding simplify banking for rural clients and cut the carbon footprint.

In addition, BRAC Bank helps finance the import of energy-efficient machinery for small manufacturers, enabling cleaner production and longer-term cost savings.

Taken together, these initiatives signal more than just compliance—they represent a new kind of banking ethos. By integrating sustainability into core business models, these banks are not only broadening access to finance but also supporting Bangladesh's ambition to transition to a low-carbon, inclusive economy.

The road ahead is not without challenges. Scalability, affordability, and regulatory alignment will be key to making green finance work for all. But the momentum is there. Private banks are no longer on the sidelines of green development—they are helping lead the charge.

As Bangladesh's MSMEs evolve into the country's green growth engines, the banking sector is proving that the future of finance is not just profitable—it can be sustainable too.