Written by The Banking Post
The Asian Development Bank (ADB) is set to extend a $100 million loan to Bangladesh aimed at bolstering the country’s small and medium-sized enterprises (SMEs), which continue to face challenges in accessing formal financing channels.
Final negotiations for the loan under the proposed Second Small and Medium-Sized Enterprise Development Project (SMEDP-II) are scheduled for Wednesday, according to officials at the Economic Relations Division (ERD).
“SMEs in Bangladesh are frequently excluded from the formal banking system. This ADB loan is intended to bridge that gap and support their growth,” said a senior ERD official, expressing optimism about securing the agreement during the negotiation.
Funded from ADB’s ordinary capital resources (OCR), the SMEDP-II seeks to scale up activities initiated under the first phase of the project. It will promote commercially viable cottage, micro, small, and medium enterprises (CMSMEs) and boost employment generation.
During the first phase, ADB provided $200 million, of which $133.3 million was allocated to small enterprises and $66.7 million to medium-sized businesses.
Under the second phase, the $100 million loan will be routed through Bangladesh Bank, with the Bangladesh Small and Cottage Industries Corporation (BSCIC) and the SME Foundation acting as key implementing partners. Of the total amount, $66.7 million will be disbursed via BSCIC and the SME Foundation, while the remainder will be channelled through commercial banks and financial institutions.
Despite accounting for nearly 85% of employment in the country, CMSMEs remain underfunded. A World Bank report, “Financing Solutions for Micro, Small and Medium Enterprises in Bangladesh,” estimates a financing gap of Tk 237 billion (approx. $2.8 billion) in the sector.
The report also highlights that 99% of non-farm enterprises in Bangladesh fall into the micro and small enterprise categories, employing over 20 million people as of 2013. However, the sector’s access to formal financial services remains well below the South Asian average.
The ADB loan is expected to help close this gap by increasing credit flow to the sector, enabling business expansion and job creation.
