Manila, Philippines (BBN)- The Asian Development Bank (ADB) is going to extend a $76 million loan to Bangladesh to facilitate the country’s economically vital non-urban small and medium-sized enterprises (SME) sector.
The loan, from ADB’s concessional Asian Development Fund, is designed to help cut poverty and create jobs outside the major urban centers, the ADB said on Monday.
The SMEs are the lifeblood of the rural economy, generating non-farm activities that provide more than 50 percent of the rural population’s employment and income. But they lack access to medium to long-term credit and the need to help the sector has been heightened by the global economic crisis which is threatening the country’s exports, remittance income, and employment generation.
Currently, the country’s underdeveloped equity and long-term debt markets limit the availability of finance for lending to SMEs, while limited credit information and infrastructure constraints also hamper the sector.
The loan funds will be made available through participating financial institutions to eligible SMEs located outside the metropolitan areas of Dhaka and Chittagong.
“Bangladesh suffers from a major disparity in poverty levels and economic activity between its eastern region, which includes the largest cities, and the west, where the incidence of poverty is over 50 percent in some places,” the ADB noted.
The ADB’s 32-year loan has an 8-year grace period carrying an interest charge of 1.0 percent per annum, rising to 1.5 percent for the balance of the term. The Ministry of Finance is the executing agency for the project, which is due for completion by September 2012, according to the statement.
BBN/SS/SI/AD-22September09-7:40 pm (BST)