One Bank Limited: A loan to support SMEs and finance green projects in Bangladesh

ONE Bank Limited (“OBL”) was set up in May 1999 and is a medium-sized private commercial bank, with total assets of USD 2,61bn at the end of September 2017, some 2,030 employees and 90 branches. 

OBL is classified as a “third generation” bank (private commercial banks established between 1999 and 2001, characterized by a medium to large balance sheet and relatively moderate trade finance operations). In Bangladesh, it is a well-performing tier II bank experiencing strong growth. It is listed on the Dhaka and Chittagong Stock Exchanges with a market capitalization of USD 241m (at 4 October 2017). Based on solid fundamentals, OBL’s management forecasts continuing growth in the coming years. 

 

OBL was initially established as a corporate bank (76% of the loan portfolio) and has also developed its SME activity, by focusing on the manufacturing sector and small industries. In OBL’s loan portfolio, SMEs accounted for 13.5% of the total according to the definition of the Central Bank of Bangladesh and 43% according to IFC and FMO criteria. For the industrial sector as a whole, the bank’s activity focuses on textiles and garments, which account for 22% of its loan portfolio. This reflects the dominant share in the country’s exports of this sector, which is the main economic driving force for Bangladesh. 

 

The USD 25m of financing will be earmarked for its SME loan portfolio (by IFC definitions), green finance (including renewable energy projects) and general loans. The funds will mainly be deployed through the bank’s Offshore Banking Unit (OBU).  

The green finance aims to reduce the carbon footprint and improve the environmental impact in various sectors. The financing could be used to finance OBL’s pipeline of projects, in line with its ambition to become one of the leading “green banks” in Bangladesh. 

So far, the projects financed by OBL have concerned solar energy and biogas, wastewater treatment plants, renewable energy projects and real estate investments in buildings benefiting from the environmental label LEED (Leadership in Energy and Environmental Design).  

The objective is to support OBL’s long-term lending activity in US dollars for its clients whose revenues are denominated in USD, for green finance and renewable energy projects, as well as for SMEs and the general lending activity.

 

“Green” projects account for 3% the bank’s loan portfolio and are expected to increase from USD 17m in 2015 to over USD 75m in 2019. OBL has set up a specific Sustainable Finance Unit dedicated to green banking and marketing green products. Thanks to PROPARCO’s loan, OBL will be able to further invest in these green projects. It is estimated that PROPARCO will contribute to financing approximately 5 renewable energy and energy efficiency (REn/EE) projects in the country. This project will thereby contribute to:

- Supplying clean and reliable energy to the population and

- Reducing energy consumption and CO2 emissions by increasing financing for projects related to renewable energies and energy efficiency. 

As OBL is one of the leading SME banks, the project will also support economic development by increasing access to financing for SMEs. In Bangladesh, SMEs are a major engine for growth and are essential for the creation of jobs and revenues. These medium-sized companies increasingly need financing in USD (mainly for long-term investments in machinery and capital goods for USD-generating activities). It is still difficult to meet this need in Bangladesh. Thanks to PROPARCO’s loan, OBL will be able to scale up its action for SMEs and offer longer maturities to its clients. The banks plans to substantially increase its SME financing to USD 450m by 2021. These SMEs mainly operate in the manufacturing and industry sectors. 

In addition, OBL supports women’s entrepreneurship, in particular via a new product currently being launched, which focuses on financing SMEs set up and led by women (with a current portfolio of USD 10m).

 

Finally, the project will have positive impacts on the economy by creating or maintaining direct and indirect jobs. OBL currently employs 2,030 people and is planning to increase its headcount to 2,350 employees over the next 5 years. Approximately 20% of the bank’s employees are women. The majority of staff have access to training on behavioral issues and related to their functions. In addition, PROPARCO’s financing earmarked for green projects is expected to contribute to maintaining or creating 8,400 indirect jobs over the next 5 years at the beneficiary clients of green finance.