The World Bank has approved $476 million for two projects to extend long-term and low-cost loans to private sector firms and improve agricultural productivity for one million poor farmers.

                The two projects will support Bangladesh to reach middle-income status by strengthening the financial sector and ensuring greater food security, Johannes Zutt, World Bank's country director, said.

Of the amount, $300 million are for the Financial Sector Support Project (FSSP) and $176.06 million for the Second National Agricultural Technology Programme (NATP II).

The rate of interest on the loans, which are coming from the International Development Association, the WB's concessional lending arm, would be LIBOR plus 3-4 percent.

The loans, which were approved last Friday by the WB board, have 38 years to maturity with a six-year grace period and carry a service charge of 0.75 percent. 

The FSSP aims to improve financial market infrastructure, the regulatory and oversight capacity of the Bangladesh Bank, and the private firms' access to long-term financing, the multilateral lender said in a statement.

By providing access to long-term finance, the project will help to build a market for long-term lending in Bangladesh, said Shah Nur Quayyum, team leader of the FSSP.

The project will also provide technical assistance for capacity building of the financial institutions and industry associations.

The financing institutions will lend at commercially determined rates and also offer Shariah-compliant financial products.

A finance ministry official said the project will be implemented through the BB. A committee led by BB governor will prepare a guideline on the size of the loan and the rate of interest on it.

The loan will be disbursed to the private sector through selected private banks, and the garments, footwear and light engineering sectors will be prioritised. The NATP II aims to support some one million poor, small and marginal farmers in 57 districts.

The farmers will benefit from stronger linkages with research, on-farm demonstrations of improved technologies, training and skills development, agricultural extension services and co-funding of productive assets, said the statement.

The project builds on the lessons learnt and the success of the first NATP project, said Patrick Verissimo, team leader of the NATP II project.

“The World Bank, along with other development partners, has long promoted agricultural technology and its adaptation to farmers in Bangladesh.”

The NATP II would promote an integrated approach to help achieve food security, adapt to climate change and enhance nutrition through safer and more diversified food.