The Asian Development Bank (ADB) will provide US$50 million loan to promote microenterprise development in Bangladesh through a credit line to Palli Karma Sahayak Foundation (PKSF) and its partner microfinance institutions.
“In this regard, the loan agreement between the government and the Asian Development Bank (ADB) will be signed on Wednesday at 10am at the NEC-2 Conference Room in the city’s Sher-e-Bangla Nagar area,” said an Economic Relations Division (ERD) official.
The official told BSS that ERD Secretary Monowar Ahmed and ADB Country Director Manmohan Parkash will sign the agreement on behalf of their respective sides. Besides, another project agreement will also be signed by the ADB and PKSF, a development finance organisation.
According to the ERD and the ADB, the project will help PKSF to develop a financing strategy and carry out institutional strengthening. For the longer term, the project will develop microenterprise finance operational guidelines for microfinance institutions, including piloting for some partner organisations, through a mobile-based financing application.
It will also assist in clustering microenterprises for business expansion and up-scaling with quality control, branding, packaging and marketing.
Out of the total project cost of US$62.5 million, which is due for completion at the end of 2020, the microenterprises will contribute US$12.5 million.
The project is accompanied by an ADB technical assistance grant of US$500,000 to enhance the capacity of PKSF and its partner organisations in microenterprise lending and promoting sustainable operations.
The grant is from ADB’s Financial Sector Development Partnership Special Fund, financed in partnership with the Government of Luxembourg.
ADB Senior Portfolio Management Specialist Mayumi Ozaki, during approval of the ADB fund, earlier had said that boosting financing through microfinance institutions to microenterprises will promote rural growth and income and job opportunities.
At present, Bangladesh’s microfinance industry comprises 758 microfinance institutions servicing 30 million clients. Microfinance traditionally provides savings and credit to finance cottage-size enterprises in rural areas run by poor or low-income people who have no access to formal financial services.
The government set up PKSF in 1990 as an apex development finance and capacity building organisation that provides loans to partner organisations.
It has become an important funding source for small and medium-sized microfinance institutions. But, at current funding levels, PKSF and its partner organisations can meet only part of their existing members’ demand.
The ADB project will help fill the funding gap in the short term. The loan will be provided to PKSF to on-lend to partner organisations to sub-lend to about 40,000 microenterprises, of whom 70 percent are female.