Bangladesh and the Asian Development Bank (ADB) on Monday signed agreements for $150 million in loan financing for cottage, micro, and small-sized enterprises (CMSEs) and creating jobs for promoting socio-economic recovery after the coronavirus disease (COVID-19) pandemic.
The assistance under the Supporting Post-COVID-19 Small-Scale Employment Creation Project will rejuvenate CMSEs operated by youth, rural entrepreneurs, returning migrant workers, particularly women, who have been hit hard by the pandemic, according to an ADB release.
Economic Relations Division (ERD) Secretary Fatima Yasmin and ADB Country Director Edimon Ginting signed the agreements on behalf of Bangladesh and ADB, respectively at a ceremony at ERD.
The loan to Bangladesh Bank, the nation’s central bank, will be on-lent to participating financial institutions (PFIs), which in turn will help 30,000 CMSEs operated by the beneficiaries.
The project will create at least 45,000 employment opportunities by December 2025. It has targeted to disburse 20 percent of the funds to microbusiness led by women to support their recovery as they have limited access to finance and have severely been affected by the pandemic due to their high concentration in retail, travel, and hospitality sectors.
ADB will provide an additional $900,000 technical assistance grant from its Technical Assistance Special Fund for Bangladesh Bank and participating financial institutions to help them strengthen their risk management capacities, business process, and information systems.
The assistance will also boost their support of CMSEs by incorporating mobile finance, value chain financing, and sustainable financing tackling climate change.
This project builds on the $250 million policy-based Strengthening Social Resilience Program, approved by ADB in June 2021, to strengthen Bangladesh’s social protection programs and resilience of vulnerable groups.
It also complements the $50 million additional financing to the ongoing Microenterprise Development Project, approved in December 2020, to help restore economic activities of microenterprises affected by COVID-19 in the country.
“The assistance will support Government’s efforts to accelerate socioeconomic recovery from the COVID-19 pandemic,” ERD secretary Fatima Yasmin said.
ADB country director Edimon Ginting said that the project will reinforce ADB’s long-standing support to Bangladesh in financial inclusion and address key barriers for financing CMSEs by developing a comprehensive action plan that will tackle sector-wide challenges, promote best practices at the banks, and expand training and business development support to the borrowers said Country Director.
“The project will also balance the affordability and availability of loans in addition to adopting innovative approaches so that lower loan interest rates do not disincentivise banks’ lending to CMSEs,” he added.