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The Asian Development Bank (ADB) has agreed to lend US$50 million to help Bangladesh promote microenterprises led by women, finance ministry officials said.
The fund will be channelled through Palli Karma Sahayak Foundation (PKSF).
The state-run top financier for micro-lenders will then distribute the funds among small enterprises through its partner organisations (POs).
The interest rate on loans will be determined in line with the ADB's London interbank offered rate (LIBOR)-based lending facility.
A commitment charge of 0.15 per cent per annum will be levied.
The ADB will provide a credit line to PKSF's partner bodies to ease short-term funding constraints in microenterprise financing, the Asian lender said in a note.
The ADB will provide the fund in a scheme, known as "microenterprise development project."
The project aims to provide loans to additional 40,000 micro-entrepreneurs of whom 70 per cent is women.
The project output will support developing a PKSF medium-term institutional strengthening and financing strategy.
The strategy includes streamlining PKSF policies, risk assessment, financial and portfolio management and monitoring, and assessing the feasibility of diversifying its funding sources.
The project will enhance the capacity of microfinance institutions (MFIs) in microenterprise lending by developing practical small enterprise finance operational guidelines for small lenders.
According to the ADB, the project will support microenterprises' access to wider and 'upscaled' markets.
It will identify promising microenterprise products for potential upscaling, and provide support for microenterprise cluster development by assisting in quality control, branding, packaging, and marketing.
"The priority will be given to women microenterprise borrowers," the note said.
After borrowing from the ADB, the ministry of finance (MoF) will relend the loan proceeds to PKSF in local currency.
The interest rate will be determined by the government.
The PKSF will then lend to POs. The latter will finance eligible borrowers at interest rate between 5.5 per cent and 8.0 per cent a year.
The project will be implemented in two years starting from January next year.