Due to limited capacity and market constraints, Bangladesh’s local financial institutions traditionally could not meet the longer-term financing demand for infrastructure investments in the country.
The World Bank was among the first development partners to support Bangladesh following its independence in 1971. Since then the Washington-based lender has committed more than $24 billion in grants and interest-free credits to Bangladesh.
It has now been announced that the global bank has approved $507 million financing for two projects in Bangladesh to enhance the local financial institutions’ capacity to provide long-term financing for private sector-led infrastructure projects, and improve multimodal transport and trade logistics infrastructure and services, including the modernizing of land ports.
Built on the success of a predecessor project, the Investment Promotion and Financing Facility (IPFF) II Project will continue enabling the participating local financial institutions to offer long-term funding to private companies to build infrastructure in various sectors including waste management, water treatment, energy saving equipment, container terminals, land ports, and bridges, said the bank in a statement.
The project will help participating local financial institutions extend long-term credits for infrastructure ventures beyond the usual lending period of five to seven years. Eligible financial institutions can apply for IPFF II funding through Bangladesh Bank.
The predecessor project, IPFF financed 11 small power plants that together generate over 550 MW electricity, three water treatment plants, an inland container depot, a fiber-optic cable network, and a dry dock.
“Bangladesh needs faster and higher quality growth to attain its vision of becoming a middle income country by 2021. The World Bank is supporting Bangladesh to overcome key bottlenecks to higher growth including addressing the huge infrastructure gap, and improving intra-regional connectivity and trade logistics,” said Qimiao Fan, World Bank Country Director for Bangladesh, Bhutan, and Nepal. “These two projects will help develop the much-needed infrastructures through building a private sector-led, long-term infrastructure financing platform and improving trade logistics.”
To improve connectivity and trade with India, Bhutan, and Nepal, the Regional Connectivity Project 1 will invest in infrastructure, systems and procedures to modernize three key land ports at Bhomra, Sheola and Ramgarh and improve security at the Benapole land port. Through the development of customs modernization and ICT infrastructure, the project will reduce the average time needed to meet the regulatory requirements associated with trade activities, and clear traded goods at land ports.
In addition, the project will benefit female traders and entrepreneurs through facilitating skills development programs, improving logistics and transport services at key border points, and developing a simplified trade regime and clearance procedures.
The projects will be funded by the World Bank’s concessionary arm, International Development Association (IDA). The Regional Connectivity Project 1 will receive $150 million zero-interest IDA credits with a 38-year term, including a six-year grace period, and a service charge of 0.75 percent. The IPFF II will receive $357 million financing, including $257 million zero-interest credit with a 38-year term, including a six-year grace period, and $100 million scale-up facility with a 30-year term, including a nine-year grace period.