Bangladesh is standing on the edge of a monumental opportunity. As one of the most dynamic economies in South Asia, it has witnessed remarkable growth in recent years. However, this progress has not been without its challenges-especially in terms of climate vulnerability, social equity, and the sustainability of the financial system that fuels this growth. The current economic model, while largely focusing on the commercial needs of the corporate landscape, is poorly adapting to the needs of the underserved population and small businesses.
The financial institutions that power Bangladesh's economy are at the heart of this transformation. They hold the power to influence and support which sectors thrive, which initiatives are funded, and ultimately, the kind of future we build for ourselves. Unfortunately, our financial system is not designed to foster inclusive, sustainable development. Instead, it often prioritizes short-term returns over long-term impact, undermining the very goals of sustainable growth and environmental resilience.
The financial sector of Bangladesh has been plagued by inefficiency, myopia, corruption, and a focus on high-risk, high-return, short-term ventures. Banks, particularly state-owned ones, have been burdened by poor governance and mismanagement, leading to an increase in non-performing loans (NPLs) and a lack of confidence in the sector. This misallocation of resources not only impedes sustainable development but also stifles the potential of emerging sectors, particularly those focused on green and socially responsible initiatives.
What made the situation grimmer is the lack of transparency and accountability in financial reporting, which has created an environment where the full impact of investments is not fully understood or acknowledged. This is especially true in the realm of environmental, social, and governance (ESG) factors, where the absence of clear reporting standards means that financial institutions are left to make decisions without a comprehensive view of the risks their investments can face-not just financially, but socially and environmentally as well.
On top of this, financial inclusion remains a distant goal for many in Bangladesh. The majority of financial resources are still concentrated in urban areas, and only a small percentage of funds are allocated to rural businesses, women entrepreneurs, or small- and medium-sized enterprises (SMEs)-the sectors that are key to building an inclusive, green economy at scale. These underserved groups are also the most likely to benefit from green finance, which would allow them to invest in sustainable agriculture, renewable energy, and other environmentally friendly practices. It is not enough for banks to simply comply with regulations; they must be held responsible for the broader impact of their investment decisions. While policies like the Sustainable Finance Policy 2020 provide a foundation, they lack robust monitoring standards and fail to effectively measure their impact. This underscores the urgent need for introducing stronger governance frameworks that ensure environmental and social risks are considered in all lending decisions.
We must create a financial ecosystem that is genuinely inclusive. From breaking down the barriers that have traditionally excluded women-led businesses, SMEs, and rural entrepreneurs from accessing the finance they need to thrive. Financial products tailored to these groups-offering lower interest rates, more flexible terms, and clearer eligibility criteria-must become the norm, not the exception. In doing so, we will create an environment where sustainable, green businesses can flourish across the country.
For Bangladesh to attract the level of foreign investment necessary to fuel this transformation, we must align our sustainability frameworks with international best practices. Financial institutions must adopt the same sustainability reporting standards used by leading financial markets, such as the Task Force on Climate-related Financial Disclosures (TCFD). This alignment will increase the credibility of Bangladesh's financial system and make it easier for international investors to assess the risks and opportunities associated with investing in the country.
We must establish clear, transparent criteria for what qualifies as "green" or "sustainable" investment, ensuring that there is no ambiguity in the types of projects that receive green financing. This will help prevent "greenwashing" and ensure that investments are genuinely contributing to environmental and social goals.
Finally, the government should create a roadmap for the gradual integration of sustainability into the financial system. This includes setting clear, time-bound targets for green financing and ensuring that financial institutions are equipped with the tools and knowledge they need to meet these targets.
Bangladesh cannot afford to wait any longer to address the structural weaknesses in its financial system. We must seize the opportunity to build a financial system that is not only profitable but also sustainable and inclusive. Let us commit to building a financial ecosystem that works for all-one that drives not just economic growth but also environmental sustainability, social equity, and long-term resilience.
The writer is a Programme Officer, Oxfam | Fair Finance Bangladesh (Country Focal)
