ADB approves $50 million more for microenterprises

The Asian Development Bank (ADB) has approved another $50 million in loan to help restore the economic activities of Bangladeshi microenterprises that have been severely affected by the Covid-19 pandemic.

The loan will scale up ADB's ongoing Microenterprise Development Project being implemented by the Palli Karma Sahayak Foundation (PKSF) in the country. The regional lender approved the project and $50 million in the first instalment in 2018.

"This additional financing will supplement the ongoing project by injecting liquidity in the rural economy by providing cheaper financing to microenterprises," said ADB Principal Country Specialist for Bangladesh Jyotsana Varma.

It will also help them continue their business and retain their employees, especially women entrepreneurs who have been heavily hit by the pandemic, she said.

"The project will increase access to financing from microfinance institutions and further contribute to the growth of microenterprises in the country," Varma added.

The new credit line to the PKSF will provide loans to at least 30,000 more microenterprises affected by Covid-19, 70% of which are led by women.

The project has been undertaken to strengthen the capacity of 120 partner microfinance institutions in microenterprise lending, such as credit appraisal, pricing, and financial and portfolio management and monitoring.

It aims to expand the application of the pilot mobile-based microenterprise financing application to additional 10,000 borrowers, which facilitates loan applications, disbursement and collection.

The project will identify three additional microenterprise products for expansion and support microenterprise cluster development.

Asked about the ADB funding, PKSF Chairman Dr Qazi Kholiquzzaman Ahmad told The Business Standard that an enterprise will get a maximum Tk10 lakh in loan under the project at an interest rate of 18%.

"There is no other cost. Enterprises that have the ability to turn around will be selected for the loan," Kholiquzzaman said.

The PKSF provides not only loans but also loan packages. Under this, the PKSF provides proper training in technology use, information on the possible market and assistance in marketing in goods production and supply, he added.

Because of the loan packages, borrowers do not default on the loan, he said, adding that no borrower, who has taken a loan under this ADB project, has defaulted so far.

Kholiquzzaman further said the ADB might lend another $100 million in the future.

Under the ongoing project, the PKSF, through its 77 partner organisations, has so far provided loans to 39,580 microenterprises, generating 91,430 jobs in rural areas.

Dr Kholiquzzaman said the ADB's assistance would help to revive microenterprises affected by the pandemic.

This will create employment opportunities which will ultimately play a role in alleviating poverty. It will also boost the rural economy, he expressed hope.