Technical assistance for brick kiln financing in Bangladesh

Year

2017

Funding

CCAC Funded

Implementing partners

United Nations Environment Programme (UNEP), Frankfurt School of Finance and Management

Brick manufacturing is an important business sector in Bangladesh. There are an estimated 7,000 brick kilns throughout the country, which contribute 1% of the gross domestic product (GDP) and provide employment to roughly 1 million people.

Traditional, energy-intensive kilns are still widely used in Bangladesh, making the brick sector a major source of greenhouse gas emissions and air pollution. In 2010, the government issued a directive banning operation of traditional fixed chimney kilns by 2012, which was later extended to 2014. Today the directive still faces considerable barriers to enforcement and implementation, and the number of climate-friendly, energy-efficient kilns has yet to increase in line with expectations.

Kiln technology upgrades are readily available, but they can cost tens of thousands of dollars or more. Although modern kilns are more profitable in the long run, the high investment is a deterrent for kiln operators who do not have the capacity or incentive to make changes on their own. Most kiln operators are not recognized as formal entities, so they are also unable to access credit.

Modernization in Bangladesh’s brick industry will require a combination of incentives and financial opportunities that encourage kiln operators to use improved technologies. The Coalition is providing technical assistance to local actors in Bangladesh to address the barriers limiting financing for modern kilns and upgrades.

Challenge

There is high interest among banks and financial institutions to scale up financing for clean and efficient brick technologies in Bangladesh. However, the market still faces considerable barriers to commercial finance.

The systematic lack of understanding of modern kiln technologies and of the long-term benefits of switching to cleaner technology is a key factor. Without access to supporting technical information, financial institutions are unable to assess the financial viability of brick manufacturing technologies, and kiln operators cannot make the case for kiln upgrades, and entrepreneurs entering the sector cannot make informed investments.

What we're doing

The Coalition is working with local actors in Bangladesh to address the barriers limiting the uptake of modern kilns through technical assistance to the government owned non-bank financial institution, IDCOL, with the ultimate goal of developing attractive end-user financing solutions for modern kiln technology.

As part of its Green Brick Programme, IDCOL proposes to invest $50 million over the next 5 years to catalyse the renewal of the stock of kilns in operation in Bangladesh. Polluting technologies will be replaced with modern, energy-efficient technologies such as the Tunnel kiln.

The Coaltion’s technical assistance to IDCOL includes:

Investigating the technical, financial and operational aspects of efficient technologies on the market (such as the Hybrid Hoffman and Tunnel kilns) in an effort to help IDCOL standardize efficient brick kiln technologies under its Green Brick Programme
Providing advisory support in the appraisal of IDCOL’s brick kiln finance projects
Extending capacity building to IDCOL and key stakeholders such as kiln investors, owners, suppliers
Increasing outreach to investors and brick kiln owners interested in adapting or installing efficient brick kiln technologies

A roadmap has been produced and will be shared with the government of Bangladesh for formal adoption and implementation.

Visiting a green kiln

The Coalition visited one of Bangladesh's newly built green kiln in 2019. Find out more