Shanghai Pudong Development Bank yesterday teamed up with International Finance Corp in smoothing the way to give green credit to small and medium-sized companies of up to 1 billion yuan (US$145.1 million).
IFC, the World Bank's private-investment arm, will offer technical support and share half of the risk of such loans, the two parties said yesterday.
IFC will provide as much as 500 million yuan in the event of default on the loans with a single case maximum taking of 40 million yuan.
Implementation of projects supported by Pudong Bank's loans is expected to reduce carbon dioxide emissions by more than 3.5 million tons a year, the equivalent of emissions from 250,000 cars.
The Shanghai-listed bank signed the deal with IFC after six months of negotiations.
Pudong Bank, the Chinese partner of Citigroup, is the third Chinese bank tying up with the IFC under the China Utility-based Energy Efficiency Finance Program, which was instituted at the request of the Ministry of Finance.
IFC may expand similar cooperation with more banks based on the successful cooperation with existing partners, said Michael Ipson, country manager of China and Mongolia of IFC.
IFC has signed so-called "risk-sharing" agreements with Industrial Bank Co and Bank of Beijing Co.
A combined total of 645 million yuan in 37 loans had been approved under the mechanism by the end of 2007 by Industrial Bank and Bank of Beijing.
The program is expected to cut 20 million tons of carbon dioxide or other greenhouse emissions annually before 2010. Energy Efficiency projects with a combined credit of up to 10 billion yuan are expected.
The Chinese central government has ordered banks to restrict lending to polluters and encouraged them to finance energy-efficient technology.
China is the world's second-largest oil consumer. The government aims to cut energy consumption by 5 percent this year for each unit of gross domestic product.
(Shanghai Daily June 18, 2008)
