Dhaka, Bangladesh (BBN)- Bangladesh will receive a $130 million credit from World Bank under a deal signed Wednesday to finance expansion of solar power system in rural areas and use of energy-saving lamps aiming to reduce consumption of electricity.

The government will utilize the fund for installation of 300,000 solar home systems (SHS) in the remote areas and supporting renewable energy based mini-grid and promoting solar water pump for irrigation.

Besides, the fund will be spent on purchase and distribution of 10 million compact fluorescent lamps (CFLs) in exchange for incandescent lamps in densely populated areas.

Economic Relations Division secretary M Musharraf Hossain Bhuiyan and World Bank Acting Country Director Ms. Tahseen Sayed signed the loan agreement in the capital, Dhaka.

The $130million credit will be provided as additional financing to the existing Rural Electrification and Renewable Energy Development (RERED) project, which has already connected around 600,000 consumers to the electricity grid, installed nearly 8,500 kilometer of new distribution lines and provided 320,000 consumers with SHS since 2003.

The Infrastructure Development Company Limited (IDCOL) and Rural Electrification Board (REB) will implement the project, which will help reduce pressure on the national power grid.

Replacing incandescent lamps by CFL, which will be distributed free of charge to residential consumers, is expected to reduce the peak electricity demand by about 360 megawatt a day.

Currently, only 40 per cent of the population has access to electricity in Bangladesh. Power shortages and load-shedding are severe, especially in rural areas.

The World Bank loan would have to be repaid in 40 years with a 10-year grace period. It carries an interest rate of 0.75 percent.

BBN/SS/SI/AD-03Septmeber09-12:18 am (BST)