Project finance in Bangladesh lets sponsors build power plants, ports, economic zone infrastructure and industrial facilities on borrowed money that is repaid from the project itself, not from the sponsor balance sheet. The structure works only when the contracts, the project company and the security package are built to the standard lenders expect.

What project finance in Bangladesh means

In a corporate loan, the bank lends against the strength of the whole borrower group. In project finance, the lender funds one asset held by one company and relies on the cash that asset will generate. If the project fails, the lender's main remedy is against the project company and its assets, not against the sponsors' other businesses.

Project finance in Bangladesh has been used most heavily in power generation, where independent power producers sell electricity to the Bangladesh Power Development Board under long-term power purchase agreements. The same techniques are used for LNG and fuel terminals, ports, toll roads, telecom towers, economic zone developers and large export-oriented factories.

Non-recourse and limited recourse

Pure non-recourse lending is rare in project finance in Bangladesh. Most deals are limited recourse: sponsors give support during construction, such as a completion guarantee, cost overrun commitments or an equity contribution agreement, and that support falls away once the project reaches commercial operation and passes agreed tests. After that point, lenders look only to the project.

The level of sponsor support is a commercial negotiation. A sponsor with a strong track record and a creditworthy offtaker can usually limit its exposure to the equity it has committed. A first-time sponsor or a merchant project without a fixed buyer should expect lenders to ask for more.

The SPV at the centre of project finance in Bangladesh

Every structure for project finance in Bangladesh is built around a special purpose vehicle. In Bangladesh this is normally a private limited company incorporated with the Registrar of Joint Stock Companies and Firms under the Companies Act 1994. The SPV owns the project, signs the project contracts, borrows the money and grants the security.

Lenders want the SPV to be "ring-fenced". Its constitution should limit it to the project, prohibit unrelated business and debt, and prevent changes to its share capital or articles without lender consent. These restrictions sit in the facility agreement, but the most important ones should also be mirrored in the articles of association, as we explain in our guide to company formation in Bangladesh.

Foreign sponsors and the SPV

Where the sponsors are foreign, equity is usually injected as share capital remitted through a bank in Bangladesh, and the investment is registered with the Bangladesh Investment Development Authority (BIDA), or with BEZA or BEPZA if the project sits in an economic zone or export processing zone. Proper inward remittance records matter: they underpin the later repatriation of dividends and, on exit, sale proceeds.

Holding company structures

Many sponsors hold the Bangladeshi SPV through an offshore holding company. This can make it easier to grant share security under a foreign law, to bring in new investors at holding level and to access tax treaty benefits. Treaty access should be checked against the Income Tax Act 2023 and the relevant treaty text, because anti-abuse rules and substance requirements apply.

Project contracts that make the deal bankable

Lenders in project finance in Bangladesh do not lend against a business plan. They lend against a set of signed contracts that allocate each major risk to the party best able to carry it. When we review project finance in Bangladesh for lenders, the contract map is the first thing we build.

The offtake or concession agreement

This is the revenue engine. In the power sector, tariffs under a power purchase agreement have often been expressed with capacity and energy components, with some elements indexed to foreign currency. Lenders examine the termination provisions closely: on what grounds can the offtaker terminate, and what compensation is payable? A termination payment that at least covers outstanding senior debt is a central bankability point.

The EPC contract

Lenders prefer a single-point EPC contract with a fixed price, a fixed completion date, liquidated damages for delay and underperformance, and performance security from a creditworthy bank. Many Bangladeshi projects use FIDIC-based forms, amended for local law. Gaps between the EPC contract and the offtake agreement, for example a longer force majeure definition in one than the other, leave the SPV carrying risk it cannot pass on. Our team covers this in detail in our EPC and O&M contracts practice.

Regulatory approvals for project finance in Bangladesh

Approvals for project finance in Bangladesh depend on the sector. Typical requirements include a generation or other licence from the Bangladesh Energy Regulatory Commission for power and energy projects, environmental clearance from the Department of Environment under the Environment Conservation Act 1995, investment registration, land-related permissions and, for public-private partnership projects, the procedures of the PPP Authority under the Bangladesh Public-Private Partnership Act 2015.

Lenders treat every material approval as a condition precedent. A missing environmental clearance or an expired licence can block the first drawdown even when every financing document is signed. A tracker of approvals, expiry dates and responsible parties is a basic tool on any project finance in Bangladesh.

Foreign currency loans and Bangladesh Bank rules

Many large deals in project finance in Bangladesh are funded by foreign lenders: development finance institutions, export credit agencies and international commercial banks. A Bangladeshi company cannot simply sign a foreign loan and start remitting interest. Foreign borrowing by private sector borrowers is controlled under the Foreign Exchange Regulation Act 1947 and Bangladesh Bank's foreign exchange guidelines.

In practice, medium and long-term foreign commercial borrowing has required prior approval, historically through a scrutiny process involving BIDA and Bangladesh Bank, covering the amount, tenor, all-in cost and purpose. The approval route and cost ceilings have been revised several times, so confirm the current procedure with Bangladesh Bank and BIDA before signing a term sheet.

Registration and debt service

Once approved, the loan is registered through an authorised dealer bank, which handles inward drawdowns and outward payments of principal, interest and fees. If repayments do not match the approved terms, the bank may refuse to remit. Any later amendment to pricing or tenor generally needs fresh approval.

Withholding tax and gross-up

Interest paid to a foreign lender may attract withholding tax under the Income Tax Act 2023 unless an exemption or treaty relief applies. Facility agreements almost always contain a gross-up clause, so the cost falls on the borrower. Model this early: it can change the economics of project finance in Bangladesh materially.

The lender security package

For project finance in Bangladesh, there is no single all-assets security instrument. Lenders take a bundle of separate security interests, each governed by its own statute and formalities. The aim is that, on default, lenders control every asset and contract needed to run or sell the project.

• Mortgage of land and buildings. Created under the Transfer of Property Act 1882 and registered with the sub-registry under the Registration Act 1908. Leasehold interests can be mortgaged where the lease permits.
• Hypothecation of plant and machinery. A floating or fixed charge over movable assets, receivables and stock, commonly used in Bangladesh.
• Pledge of shares. Over the sponsors' shares in the SPV, with signed blank transfer forms and resignation letters held by the security agent.
• Assignment of project contracts. Assignment by way of security of the offtake, EPC, O&M and insurance proceeds, usually with counterparty acknowledgement.
• Account charges. Charges over the project accounts and the debt service reserve account.
• Sponsor support. Equity contribution agreements, completion guarantees and subordination of shareholder loans.

Registering charges with RJSC

Charges created by a company over its property must be registered with RJSC within the period set by the Companies Act 1994. An unregistered charge is void against a liquidator and other creditors, even though the debt remains payable. This is one of the most important perfection steps in project finance in Bangladesh, and the deadline runs from creation of the charge.

Stamp duty and registration costs

Mortgages, hypothecations and other security documents attract stamp duty under the Stamp Act 1899, and registered mortgages attract registration fees. Rates have changed through successive Finance Acts, so obtain the current schedule before closing and budget for it in the financial model.

Security agents and intercreditor arrangements

Where several lenders in project finance in Bangladesh share one security package, a security agent or security trustee holds the security for all of them. Bangladeshi law recognises trusts under the Trusts Act 1882, and security trustee structures are used in practice, but local counsel should confirm that each instrument can be held by the agent and enforced on behalf of all lenders.

When local and foreign lenders fund the same project, an intercreditor agreement sets the ranking of their claims, how decisions are taken, how enforcement proceeds are shared and how currency differences are handled. Local banks often take security in their own names because of the practicalities of enforcement through the local courts, which must be coordinated carefully with the offshore agent structure.

Local and foreign co-financing of project finance in Bangladesh

Mixed structures are now common: a taka tranche from local banks or IDCOL, and a foreign currency tranche from international lenders. Local bank lending is subject to Bank Company Act 1991 rules and Bangladesh Bank prudential limits, including large exposure and single borrower limits, which often decide how much any one local bank can lend.

Direct agreements and step-in rights

In project finance in Bangladesh, a direct agreement is signed between the lenders, the SPV and a key counterparty, such as the offtaker or the EPC contractor. The counterparty agrees to give lenders notice of any SPV default, to allow a cure period, and not to terminate without giving lenders the chance to step in or transfer the contract to a new operator.

Step-in rights are often more valuable than the right to sell assets. A half-built power plant has limited resale value; a plant that lenders can complete with a replacement contractor, under the same tariff, can still repay the debt. Government counterparties may resist broad step-in rights, so this is usually negotiated during the implementation agreement.

Steps to close project finance in Bangladesh

Financial close in project finance in Bangladesh is the moment all financing documents are signed and conditions precedent satisfied, so that the first drawdown can be made. The sequence below reflects how we usually run project finance in Bangladesh from the sponsor side.

1. Form the SPV. Incorporate the project company with RJSC, with ring-fencing provisions in its articles and a capital structure that fits the agreed debt-to-equity ratio.
2. Lock in the project contracts. Sign or settle the offtake or concession, EPC, O&M, fuel supply and land documents, with consistent risk allocation.
3. Obtain approvals. Secure investment registration, sector licences, environmental clearance and any PPP Authority or ministry approvals.
4. Agree the term sheet. Settle pricing, tenor, sponsor support, covenants and the security package with the lead lenders.
5. Complete due diligence. Lenders' legal, technical, insurance and model auditors report on the project. Fix issues before signing.
6. Sign the finance documents. Execute the facility agreement, security documents, intercreditor agreement and direct agreements.
7. Obtain borrowing approvals. Complete the foreign loan approval and register the loan with the authorised dealer bank.
8. Perfect security and draw. Stamp and register mortgages, file charges with RJSC, deliver legal opinions and satisfy conditions precedent.

Delays usually arise at steps three and seven, where third-party timetables are outside the parties' control. Start those processes as early as the documents allow.

Enforcement and disputes

When project finance in Bangladesh goes wrong, lenders first use the contractual tools: cash sweeps, lock-up of distributions, cure periods and step-in. Enforcement of security comes later. For banks and financial institutions, money recovery suits are brought in the Artha Rin Adalat under the Artha Rin Adalat Ain 2003, which also gives lenders certain powers to sell mortgaged or hypothecated property after notice. Insolvency of the SPV would fall under the winding-up provisions of the Companies Act 1994.

Arbitration and governing law

Foreign lenders commonly choose English law for facility agreements and arbitration in Singapore or London, while local security documents are governed by Bangladeshi law. Bangladesh is a party to the New York Convention, and foreign awards are enforced through the Arbitration Act 2001. Project contracts with government entities often specify arbitration seated in Dhaka or abroad. Read our guide to arbitration in Bangladesh for the local procedure.

Common mistakes in project finance in Bangladesh

• Misaligned contracts. Force majeure, change in law and dispute clauses that differ between the offtake and EPC contracts.
• Unregistered charges. Missing the RJSC deadline and leaving lenders unsecured on liquidation.
• Late borrowing approval. Signing a foreign facility before checking whether its pricing will be approved.
• Weak land title. Relying on deeds without a full chain of title, mutation records and khatian checks.
• Insurance gaps. Policies that do not name lenders as loss payee or do not meet local placement requirements.
• Unhedged currency risk. Taka revenues servicing dollar debt without an indexation or hedging plan.

Frequently asked questions about project finance in Bangladesh

How we can help

We advise sponsors, lenders and contractors on project finance in Bangladesh, from SPV structuring and contract review to security perfection, foreign loan approvals and enforcement. Learn more about our project finance practice and our wider banking and finance work.

Primary sources: statutes on the Laws of Bangladesh portal; foreign exchange guidance from Bangladesh Bank; PPP procedures from the PPP Authority; energy licensing from BERC.

This article is general information about Bangladeshi law as of 2026 and is not legal advice. Approval routes, stamp duties and regulatory rules change; confirm current requirements with the relevant authority or a qualified lawyer before acting.