1. Bangladesh is one of the most vulnerable countries to the effect of climate change for its terrestrial and demographic features. In recent times, climate displacement and internal migration to the big city slums for employment opportunities have been critical problems for the country hindering the attainment of a number of Sustainable Development Goals (SDGs). Given the social and economic background, the country needs to find an alternative solution to stop internal migration by creating employment opportunities. Moreover, several estimates suggest that there prevails a large finance gap in terms of achieving the SDGs both globally and locally. In this regard, blended finance can play a crucial role in mobilising funds from various sources, especially green climate funds (GCF). However, a prudent framework is required to operationalise a blended
finance mechanism in Bangladesh. Therefore, the objectives of the study are to identify the opportunities and challenges of the blended finance mechanism involving climate funds and to recommend a generic blended finance framework with suggested key activities at different stages.
2. The blended finance mechanism has become a new and evolving concept in development finance to attain the SDGs in developing countries, having some key characteristics as follows—(i) combination of public and private finance, (ii) involves of both concessional and non-concessional funds, (iii) investment friendly, and (iv) allows stakeholder’s participatory consultation. The mechanism has critical implications for addressing the substantial resource gap to implement development projects. This mechanism can play an exceptionally crucial role in financing ongoing as well as new projects in the post-COVID era in view of the unprecedented pressure facing global economies due to the COVID-19 crisis. With policy guidelines and support, blended finance can contribute to poverty reduction, job creation, small and medium-sized enterprises (SME) development, clean energy, women empowerment, gender equality, and supporting the public health system, for inclusive, resilient and sustainable development aligned with national development priorities. However, lack of regulation, inadequate financing opportunities, identifying development objectives with credible estimation of financing gap, failure to attract private investment, ethical issues, lack of education, and low level of skills are the challenges for establishing a blended finance mechanism in Bangladesh.
3. In this report, a generic and conceptual framework of blended finance is proposed for Bangladesh which has four key stages: diagnostic stage; fund mobilisation stage; risk management stage; and fund transfer, disbursement and repayment stage. The successful mobilisation of funds and sustainable implementation of blended fund interventions crucially depends on the existence of a proper policy as well as on regulatory, institutional and legal frameworks addressing governance and accountability issues. Therefore, each stage suggests certain vital activities and separate governance and monitoring and evaluation mechanism to oversee under a sound policy framework. Besides, the government should engage, consult and collaborate with other stakeholders in a participatory manner while developing these frameworks and mechanism. Regulatory bodies (i.e., Bangladesh Bank and other relevant government organs) need to work simultaneously in a coordinated manner to ensure accountability and transparency, and to consistently monitor and evaluate the credit disbursement process (including beneficiary selection) and repayment procedure. The proposed framework is a flexible and dynamic one that involves feedback loops allowing to make necessary revisions with reflections of stakeholders’ opinions and suggestions.
4. Migration to overcrowded and unsafe urban slums in big cities is one of the damaging consequences of natural disasters and climate change. The marginal people living in the disaster-prone areas are more likely to migrate to other big cities in search of shelter, employment and livelihood which put pressure on the cities. With a limited access to basic amenities—water, sanitation, electricity, transportation, basic medication, education, etc.—cities like Dhaka and Chattogram are unable to serve the purpose of this huge population. As a result, the significant rise in the number of climate displaced people in Bangladesh raises concern as this may lead to increased urbanisation and adverse impact on environment.
5. The study suggests the following interventions: facilitating the cottage, micro, small and medium enterprises (CMSMEs) improved access to finance by providing credit from the formal financing (banking and non-banking) channel; using a blended finance mechanism with contributions from the climate fund; and promoting employment-generating green growth in disaster-prone areas/selected regional growth hub with appropriate geographical and sub-sectoral targeting at the implementation stage. The study also recommends that creating alternative employment opportunities by providing CMSMEs improved access to finance in selected geographical locations and promoting employment-rich green growth can be a high impact intervention to address the problem.
6. This scoping study attempts to connect three important and vast topics: blended finance; development challenges imposed by climate migration to urban slums; and CMSMEs improved access to finance as a possible intervention to address the challenges. The aim of this report is to introduce and socialise these ideas among policymakers and other stakeholders with a framework to discuss and develop further.