(Photo: VCG)

The Asian Infrastructure Investment Bank (AIIB) has approved a 200-million-U.S.-dollar loan for a Bangladeshi project to improve access to electricity and service efficiency in capital Dhaka and elsewhere in the country.

While the Bangladeshi government has implemented various programs to meet growing demand for power, mainly as a result of rapid industrialization and urbanization, about 22 percent of the population still lack access to electricity, said the Beijing-based lender in a statement posted on its website on Tuesday.

It is estimated that poor power supply has resulted in about 2-3 percent loss to Bangladesh's gross domestic product annually, with significant sums spent on diesel generators for backup, said the bank.

By 2025, it said the Dhaka and Western Zone Transmission Grid Expansion Project is expected upon completion to reduce the number of annual power outages to 15 (from 60), reduce transmission loss to 2.50 percent (from 2.76 percent) and add 7,440 megavolt-amperes of power transmission capacity.

The project, according to the statement, will lead to the construction of 408 kilometers of transmission lines, and will also have a positive environmental impact, reducing average annual carbon dioxide emissions by 455,785 tons.

"AIIB's investment gives much-needed financing to provide affordable, reliable and modern energy, especially in areas where people lack basic infrastructure," said AIIB Vice President and Chief Investment Officer D.J. Pandian.

"The project will also help the power sector tackle climate change impacts, making the grid more climate-resilient."

AIIB said Bangladesh is currently the fastest growing economy in South Asia, growing over 7.5 percent per annum in the last three years.

The country is also rapidly urbanizing with nearly half its population expected to live in urban areas by 2025, it said, adding that these trends, combined with a policy push to achieve universal electricity access for Bangladesh's population, present a tremendous growth opportunity for the country's infrastructure sector in the near future.

Cofinanced with the Asian Development Bank, the project is expected to help Bangladesh achieve its target to provide electricity for all by 2021 and supply uninterrupted electricity to industries by 2020, said the bank.