ADB’s $200m loan targets SMEs outside Dhaka-Ctg

The Asian Development Bank (ADB) will provide $200 million in loans to small and medium-sized enterprises (SMEs) in rural Bangladesh to help them gain access to medium- to long-term credit.

The credit facility will target in particular firms run by women, who are mostly engaged in subsistence trade and retail activities, and are typically less educated and have less access to SME finance than men, said a ADB media release, reports UNB.

“Rural firms and firms run by women struggle to get loans from banks. That means both they and the Bangladesh economy lose out,” said Peter Marro, Principal Financial Sector Specialist, in ADB’s South Asia Regional Department. “We want to help cottage industries and SMEs expand and flourish, including those operated by women.”

Loans will be targeted at small firms outside of the metropolitan areas of Dhaka and Chittagong, with at least 15 percent allocated for women entrepreneurs.

There are about 7.2 million SMEs in Bangladesh. They account for 90 percent of all companies and employ 70-80 percent of the non-agricultural workforce in Bangladesh. In 2014, SMEs contributed 25 percent of Bangladesh’s gross domestic product and 40 percent of the manufacturing output.

However, SME growth is constrained by the inadequate access to finance and electricity, poor transportation, increasing labor costs, and lack of skilled manufacturing labor– especially in rural areas.

The project also includes $2 million in technical assistance from the Japan Fund for Poverty Reduction to help establish incubation facilities at educational institutions to promote entrepreneurship, and support entrepreneurs’ development units at Bangladesh Bank.

It will also set up dedicated women’s desks in financial institutions, and strengthen the capacities of women entrepreneurs in accessing available credit facility through financial and legal literacy as well as in managing their enterprises.

This assistance will help in the development of SME clusters to boost their capacity to access bank financing and strengthen the backward and forward links of SMEs to the formal sector, particularly the larger export-driven industries.