Green Transition Working Group launched to expand green financing for SMEs

A multi-stakeholder Green Transition Working Group (GTWG) has been launched in Bangladesh to expand access to green and sustainable financing for small and medium enterprises (SMEs) and accelerate their transition towards environmentally sustainable business practices.

Business Initiative Leading Development (BUILD), in collaboration with the United Nations Capital Development Fund (UNCDF), launched the initiative through an inception workshop held in Dhaka on Thursday under the Access to Green Finance (A2GF) for Enterprises Programme, said a press release today.

The initiative aims to address major barriers faced by SMEs in accessing green finance, adopting resource-efficient technologies and complying with environmental, social and governance (ESG) standards.

Speaking at the workshop as the chief guest, Mohammad Navid Safiullah, additional secretary to the Ministry of Environment, Forest and Climate Change and chair of the GTWG, identified six critical issues for accelerating the green transition: efficient use of resources, green financing, technology transfer and skill development, market expansion, climate resilience, and coordination and accountability.

He stressed the need to move from a centralized approach to decentralization to ensure effective implementation of green transition initiatives.

Regarding the carbon market, he said the draft carbon market framework had been almost finalized and was awaiting cabinet approval.

He also said the ministry had established a governing body under Article 6 of the Paris Agreement to facilitate the development of the country's carbon market.

Speaking at the event, Mohammad Muslim Chowdhury, former finance secretary and former chairman of Sonali Bank PLC, said Bangladesh could no longer depend solely on its labour-cost advantage to remain competitive as technology was gradually replacing traditional labour-intensive activities.

"We need to identify new sources of competitiveness," he said, stressing the need to bring scattered financing resources under a single umbrella for better coordination and effective utilization.

He also called for greater collaboration among institutions and stakeholders to make green transition initiatives practical and result-oriented.

Ferdaus Ara Begum, CEO of BUILD, said cottage, micro and small enterprises account for around 99 percent of manufacturing enterprises in Bangladesh but face significant barriers to accessing formal financing.

Limited access to affordable finance, complex procedures and documentation requirements often prevent smaller enterprises from adopting resource-efficient technologies and sustainable business practices, she said.

She identified four priority areas for the working group: finance and incentives; environmental, social and governance (ESG) standards and measurement, reporting and verification (MRV); technology and circularity; and policy and regulatory reform.

Ferdaus Ara Begum called for evidence-based recommendations to expand green financing, promote cluster-based decarbonization and support women-led enterprises and businesses in climate-vulnerable areas.

Md. Mahbubur Rahman, additional director of Bangladesh Bank's SME and Special Programmes Department, highlighted the central bank's financing schemes for SMEs and its initiatives to support innovative entrepreneurship, particularly in rural areas.

He said the government was willing to support innovative ideas and help entrepreneurs turn them into viable business ventures.

Sadat Mainuddin, country project manager of UNCDF, said the A2GF programme was already supporting green loans at single-digit interest rates.

He said although policies and financing initiatives for green transition were available, stronger coordination among stakeholders was necessary to achieve meaningful results.

Mohammad Navid Shafiullah and other speakers also underscored the importance of technology transfer, capacity development and institutional coordination in helping SMEs adopt sustainable production methods.

Presenting an evidence-based analysis, Dr. Wasel Bin Shadat, research director of BUILD, said SMEs account for approximately 99 percent of Bangladesh's 11.7 million industrial units, contribute around 30 percent of GDP and are associated with nearly 85 percent of industrial employment.

He identified limited access to green finance, inadequate ESG reporting capacity, constraints in technology adoption and fragmented policy coordination as four major barriers to the green transition of SMEs.

Despite the expansion of green financing facilities, SMEs receive only around 1 to 5 percent of total green financing, according to estimates presented at the workshop.

He also referred to the Green Transformation Fund's Taka 5,000 crore local-currency window, of which Taka 1,832 crore had been disbursed as of June 30, 2025, and stressed the need to make existing financing facilities more accessible to smaller enterprises.

To translate the initiative into practical outcomes, he proposed a 12-month roadmap that includes piloting a standardized green-investment application template with at least three banks, testing simplified sustainability reporting among at least 100 micro and small enterprises, conducting energy and resource audits for 50 SMEs in an industrial cluster, and establishing a shared SME green-finance database through Bangladesh Bank.

During thematic discussions, stakeholders recommended introducing accessible financing packages combining loans, grants, training and technical assistance to help SMEs meet the high costs of green transformation.

They also called for simplified ESG reporting, AI-enabled monitoring tools, standardized emissions data and reporting requirements proportionate to the size and capacity of enterprises.

Other recommendations included promoting rooftop solar power, improving water and wastewater management, introducing sustainable brick-kiln technologies and providing concessional finance and technical training.

The policy reform group proposed simplified environmental clearance procedures for low-risk SMEs, a common definition of green SMEs, improved green-finance data and favourable fiscal measures, including reduced duties and VAT on clean technologies and equipment.

In her closing remarks, Ameena Chowdhury, senior programme manager at the Embassy of Switzerland in Bangladesh, emphasized building on existing institutional structures and partnerships rather than starting new initiatives from scratch.

She called for realistic, time-bound action plans, stronger private-sector financing and sustained collaboration to translate policy discussions into tangible results.

The A2GF programme is part of the Leaving No One Behind (LNOB) in the Digital Era in Bangladesh project. It is funded by the Embassy of Switzerland in Bangladesh and implemented by UNCDF in collaboration with OneTrueValue and LightCastle Partners.

The workshop concluded with discussions on the proposed governance structure, pilot initiatives and priority activities for 2026-27.

The recommendations will help develop an initial roadmap outlining stakeholder responsibilities, timelines and potential technical and financial support for accelerating the green transition of SMEs in Bangladesh.