ADB provides $50m to promote microenterprise in Bangladesh

The Asian Development Bank (ADB) and the government signed on Wednesday an agreement for $50 million in loan to promote microenterprise development for inclusive economic growth and poverty reduction, reports UNB.

The assistance will help improve microenterprises' access to finance through the Palli Karma Sahayak Foundation (PKSF), an apex development finance and capacity building organisation, and its partner organisations.

Monowar Ahmed, Secretary, Economic Relations Division (ERD), and Manmohan Parkash, Country Director, ADB, signed the agreement on behalf of Bangladesh and ADB, respectively, at a ceremony in the city.

The total cost of the project, which is due for completion at the end of 2020, is $62.5million, of which the microenterprises will contribute $12.5million.

"The greatest constraint in developing microenterprises in Bangladesh is the limited access to finance. This project will provide financing to ease this constraint," said Manmohan Parkash.

"The project also introduces an innovative mobile-based microenterprise financing application on a pilot basis, and boosts forward linkages to agriculture, thus promoting rural growth and income and job opportunities."

The loan will be provided to PKSF to on-lend to partner organisations to sub-lend to about 40,000 microenterprises, of whom 70 per cent are female.

To address medium-term challenges, the project will help PKSF develop a financing strategy and carry out institutional strengthening.

For the longer term, ADB said, the project will develop microenterprise finance operational guidelines for microfinance institutions.

It will also assist in clustering microenterprises for business expansion and upscaling with quality control, branding, packaging, and marketing. In addition, the project raises market orientation of financing institutions, as well as enhance microenterprises' skills to make enterprise loans, and monitor environmental and social safeguard.

The project is accompanied by an ADB technical assistance grant of $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.