ADB approves $900m in policy-based loans for Bangladesh

The Asian Development Bank (ADB) has approved $900 million in policy-based loans for Bangladesh- $500 million for reforming the banking sector, and $400 million to enhance climate resilience.

ADB has approved a $500 million policy-based loan to stabilize and reform the banking sector in Bangladesh by strengthening regulatory supervision, corporate governance, asset quality, and stability.

According to a press release received Thursday, the Stabilizing and Reforming the Banking Sector Program, Subprogram 1 will focus on policy reforms to promote finance sector resilience by enhancing banking sector governance, increasing the effectiveness of Bangladesh Bank’s liquidity management framework, and introducing immediate measures to resolve significant nonperforming loans in the banking system. 

The measures under the program will support phased compliance with international banking norms, leading to integrity in asset quality information.

ADB Principal Financial Sector Specialist Sanjeev Kaushik said, “The key binding constraints in the banking sector include a lack of robust asset quality, tight liquidity, and inadequate financial intermediation leading to low rates of financial inclusion.” 

“The program will bring significant value addition through building the regulator’s capacity for ensuring compliance with international norms, augmenting the capitalization of the banking sector and improving access to affordable finance for micro, small and medium enterprises.”

ADB has also approved a $400 million loan to help Bangladesh enhance its resilience against climate impacts, cut emissions in climate-critical sectors, and promote inclusive development.

The funding will support the second phase of the Climate-Resilient Inclusive Development Program (CRIDP), which includes nearly $113 million in cofinancing from the Agence Francaise de Developpement, and $400 million from the Asian Infrastructure Investment Bank (AIIB).

“The program will help Bangladesh achieve its climate goals more efficiently by bringing government agencies together and aligning their work with national policies,” said ADB Senior Public Sector Economist Sameer Khatiwada. “It will also remove obstacles to mobilizing climate finance, reinforce adaptation efforts in priority sectors, and speed up actions to reduce climate impacts.”

Under CRIDP, the Bangladesh Climate Development Partnership will be established to secure climate finance and help government ministries to develop, implement, monitor and evaluate climate projects more effectively. A new framework will scale up local youth-related and gender-responsive local adaptation measures. The program also supports a national disaster risk financing strategy including instruments like crop insurance, disaster risk insurance, and contingent disaster financing.

Additionally, the program supports the update of the Revised Strategic Transport Masterplan for Dhaka (2025–2034), and implementation monitoring of the renewable energy components of the Integrated Energy and Power Master Plan, which aims to promote climate-friendly transport systems and renewable energy.