Amid concerns about receding support from the government’s traditional funding partners, a new financing partner is promising to back development projects with less processing time and support with implementation problems.
The Asian Infrastructure Development Bank (AIIB), a multilateral development bank reportedly backed by China, offers sovereign and non-sovereign financing for projects in the sectors including energy and power, transportation and telecommunications, rural infrastructure and agriculture development, water supply and sanitation, environmental protection, and urban development and logistics.
Headquartered in Beijing, the bank aims to finance energy, transportation and water sector development in Bangladesh and it has already approved a total credit of $285 million at three projects in the energy sector, said Laurel Ostfield, the head of communications and development of the AIIB.
“The AIIB in response to the Bangladesh government has approved a total loan of $285 million in three energy projects - two gas-based plants and one based on power transmission and distribution. The latest loan approval was passed on February 8,” she said at a views exchange program with Bangladeshi journalists at a hotel in Dhaka.
She said that the latest approved loan was of $60 million to support the development of Bangladesh Bhola IPP, a Greenfield 220-megawatt combined cycle power plant at Bhola island in Barisal, while the total project cost is $271 million.
The AIIB has approved the loan in a response to a loan application from the Bangladesh government, said Ostfield.
“Moreover, the AIIB is supposed to invest more $885 million within the next five years at five projects of three sectors in Bangladesh.”
Asked about Bangladesh’s benefits in terms of borrowing from the AIIB instead of other global development partners, Ostfield said: “The main advantage of taking loans from the AIIB is that our lending process is faster than everyone else. There are no legislative complications at our organization, so the borrowers can get funds within the shortest time. Moreover, we have specialized teams to inspect funded projects and they are involved in fixing project implementation problems.”
She also said: “Our core principles are openness, transparency, independence and accountability and our mode of operation is ‘Lean, Clean and Green.’ We are very strict against corruption.”
“One more thing, we are not charitable organization and we are not offering any concessional loans, our purpose is to address Asia’s daunting infrastructure, while the lending will be prioritized on the basis of business viability,” added Ostfield.
When asked about the interest rate of the AIIB-funded credit, Yuanjiang SUN, principal communication officer of the AIIB said: “The standardized rates of interest on AIIB credits are fixed between 2.4% and 2.5%.”
The AIIB began operations in January 2016 and now has 84 approved members including Bangladesh.