ADB to lend $100m to boost BD SMEs

The Asian Development Bank (ADB) is set to provide a US$100 million loan to support Bangladesh's small and medium-sized enterprises (SMEs), as they are largely deprived of formal lending, officials said on Tuesday.

Negotiations between the Bangladesh government and the Manila-based lender are scheduled for tomorrow to finalise the financial assistance under the proposed "Second Small and Medium-Sized Enterprise Development Project (Phase II)," they added.

"Since SMEs in Bangladesh are often excluded from the country's conventional banking system, the ADB loan will enhance their access to funding, facilitating business expansion," said a senior official of the Economic Relations Division (ERD). "We are hopeful of securing confirmation during the negotiation meeting."

The second phase of the SME Development Project (SMEDP-II) includes a $100 million loan from ADB's ordinary capital resources (OCR). It aims to scale up activities launched under the first phase by increasing the number and size of commercially viable cottage, micro, small and medium enterprises (CMSMEs), and supporting employment in the sector.

In the first phase of the project, ADB provided $200 million, allocating $133.3 million for small enterprises and $66.7 million for medium-sized businesses.

According to ERD officials, the new $100 million loan will be channelled through the Bangladesh Bank (BB) to finance CMSMEs across the country. The Bangladesh Small and Cottage Industries Corporation (BSCIC) and the SME Foundation will work as key implementing partners alongside the central bank.

Out of the total loan amount, BSCIC and the SME Foundation will disburse $66.7 million to support CMSMEs, while the remainder will be distributed through commercial banks and financial institutions.

Despite CMSMEs accounting for nearly 85 per cent of employment in Bangladesh, they remain largely excluded from formal financial services. A World Bank report titled "Financing Solutions for Micro, Small and Medium Enterprises in Bangladesh" estimates a financing gap of Tk 237 billion (US$2.8 billion) in the sector.

The report also notes that 99 per cent of all non-farm enterprises in Bangladesh fall within the micro and small enterprise categories, providing jobs for around 20.3 million people as of 2013. Yet, the sector's access to formal finance remains significantly lower than the South Asian average.

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