Bangladesh signs $50m deal with ADB to finance virus-hit microenterprises

The government has signed a $50 million in additional loan agreement with the Asian Development Bank (ADB) to help restore the economic activities of microenterprises severely affected by the Covid-19 pandemic.

Economic Relations Secretary Fatima Yasmin and ADB Country Director Manmohan Parkash signed the deal at a ceremony in Dhaka on Monday, according to a statement from the ADB.

The additional loan will scale up the ongoing Microenterprise Development Project (MDP), which ADB approved in 2018 to provide a $50 million credit line to Palli Karma Sahayak Foundation (PKSF), a government development finance and capacity building organisation.

“The assistance will expedite Bangladesh’s progress in socio-economic recovery from the losses induced by the COVID-19 pandemic,” said Parkash. “The assistance will inject liquidity into the rural economy and help retain businesses and jobs for microenterprises with at least 90,000 jobs protected or created, of which 70% are for women.”

“I am glad that the government and the PKSF on ADB’s request have reduced the loan on lending rate from the current 24% to a maximum of 18% per year, which will benefit all microenterprises to access financing in cheaper terms, including at least 30,000 COVID-19 affected microenterprises,” said the country director.

Applauding PKSF’s exemplary work in promoting the micro, small and medium-sized enterprises in the country, Parkash said, “ADB will help further institutional strengthening of the PKSF, leverage another $120 million to support microenterprises, introduce development clusters which will help address supply chain disruptions caused by the pandemic, and promote a shift in the MFI business model to digital transactions, which are more efficient and easier and safer for borrowers to use in the post-COVID-19 scenario.”

The MDP will strengthen the capacity of 120 partner microfinance institutions in microenterprise lending, such as credit appraisal, pricing, and financial and portfolio management and monitoring. Over 10,000 additional borrowers will come under mobile-based microenterprise financing applications to quickly facilitate loan applications, disbursement, and collection. The project will also promote marketing of products through e-commerce.

The project will identify three additional microenterprise products for expanding and supporting microenterprise cluster development to connect to the regional value chain to address supply chain disruptions caused by the pandemic. The assistance will boost agriculture, fisheries, livestock, small manufacturing, food processing, services, and trading, which are badly affected by the Covid-19 pandemic. Under the ongoing project, the PKSF, through its 77 partner organizations, has so far provided loans to 39,580 microenterprises, generating 91,430 jobs in rural areas.