Multilateral lenders are joining with the government to boost financing for micro entrepreneurs in order to rejuvenate the tens of thousands of pandemic-hit micro and small enterprises.

Yesterday, the Asian Development Bank (ADB) said it would provide a $50 million loan to help restore the economic activities of local micro businesses.

The development comes as the government plans to allocate another Tk 3,000 crore to increase the size of the credit guarantee scheme on the small loans announced in July to give a lifeline to cottage and micro-entrepreneurs, who account for more than 90 per cent of the 78.18 lakh firms in Bangladesh.

The government and the World Bank will provide the fund.

Fresh funds are in the pipeline of Bangladesh Small and Cottage Industries Corporation and SME Foundation for providing loans to small and cottage industries, top government officials and representatives of development partners said at an event last week.

ADB said its latest loan will scale up the ongoing Microenterprise Development Project that it had approved in 2018 to provide a $50 million credit line to the Palli Karma Sahayak Foundation (PKSF), a government development finance and capacity building organisation.

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, the Manila-based lender said.

"This additional financing will supplement the ongoing project by injecting liquidity into the rural economy by providing cheaper financing to microenterprises, helping them continue their business and retain employees, especially women entrepreneurs who have been heavily hit by the ongoing pandemic," said Jyotsana Varma, ADB's principal country specialist to Bangladesh.

"The project will increase access to financing for microfinance institutions and further contribute to the growth of microenterprises across the country," she added.

The ADB said the new credit line to the PKSF will provide loans to at least 30,000 pandemic-affected microenterprises, 70 per cent of which are women-led.

While speaking on the issue of finance for small and micro entrepreneurs at an event organised by the Finance Division last week, Bangladesh Bank Governor Fazle Kabir said the central bank examined the issue of loans to small business.

He said the number of microfinance institutions (MFIs) is no more than 750 while big MFIs are not interested to finance the small businesses affected by Covid-19.

Besides, interest rates charged by the large MFIs on loans are more than 20 per cent.

"Let them do that. We are providing funds to small MFIs and we will continue," Kabir said, adding that the disbursement of small loans has been low but the number of beneficiaries are much higher than the large receipts of the stimulus packages.

The government has so far rolled out 21 stimulus packages since March to absorb the economic shocks of the Covid-19 fallout.

Of the packages, six involving Tk 34,458 crore were aimed at employment creation and revitalisation of the rural economy. But till November, Tk 13,053 crore or 37.88 per cent of the amount was disbursed, according to finance ministry officials.