The microenterprise (ME) sector in Bangladesh has been playing a pivotal role in the economic development of the country. Currently, 89% of almost 8 million enterprises are microenterprises which have generated about 56% of the private sector jobs. However, despite its importance in promoting economic growth, the microenterprise sector has been riddled with various financial and non-financial constraints. According to a Sector Assessment conducted by Asian Development Bank (ADB), the share of own fund in microenterprises’ total capital structure is around 84%, while the share of bank credit is 4%, and MFIs’ credit is about 12%.
In this context, PKSF has undertaken the Microenterprise Financing and Credit Enhancement (MFCE) Project funded by ADB to create sustainable employment by providing holistic support to the microenterprises. Building on the impacts of Microenterprise Development Project (MDP), which was completed on June 30, 2023, the MFCE project aims to increase microenterprises’ access to finance via Partner Organizations (POs) in a more sustainable manner. PKSF will also establish a pilot Credit Guarantee Fund (CGF) under this project in order to increase the PO’s access to commercial bank financing for the microenterprise loan program.
Project Objective: To create sustainable employment by providing financial and institutional support to the microenterprises.
Partner Organizations (POs) and Working Area: The MFCE Project will be implemented throughout the country by 118 POs.
Project Duration: The duration of the project is 5 years (16 May 2023-30 June 2028).
Project Budget: The MFCE Project will have USD 200.00 million in loan and USD 1.0 million in technical assistance provided by ADB. The breakdown of the budget is as follows:
Budget (in million US$)
Credit Guarantee Fund (CGF)
Technical Assistance (TA)
- Credit Line: Under the MFCE Project USD 180.0 million will be disbursed to microenterprise borrowers throughout the country by 118 POs. At least 1,00,000 new microenterprise borrowers will receive loan under this project of whom at least 80% will be women. At least 40 percent of the loan proceeds will be disbursed to the relatively poverty-stricken areas and 10 percent to the climate-vulnerable areas under the project. Business cluster-based microenterprises will be prioritized under this component.
- Credit Guarantee: PKSF will establish a pilot Credit Guarantee Fund (CGF) of USD 20.0 million under this project in order to enhance PO’s access to finance from commercial banks. Under this component, PKSF will provide partial coverage to commercial bank lenders against default of the principal loan amount lent to the POs for financing their microenterprise credit program. POs who have limited access to commercial bank financing will be prioritized under this component. The MFCE Project aims to increase PO’s borrowings from commercial banks for microenterprise loans by BDT 9,400 crore as a result of the credit guarantee program.
- Technical Assistance: The MFCE Project has a Technical Assistance (TA) component which will be used to enhance the institutional capacity of PKSF and POs. At least 60,000 women borrowers will receive training on entrepreneurship skill development under this component. The POs will also receive capacity enhancement training on environmental safeguard and development of disaster and climate change risk management systems in microenterprises. PKSF will receive assistance in establishing and operating a viable Credit Guarantee Fund (CGF), a risk management framework and a digital transformation roadmap under this component.
Project Focal Areas: The MFCE project will focus on the following core areas:
- Gender Equality and Social Inclusion (GESI): A Gender Action Plan (GAP) will be implemented in this project which will facilitate the enhancement of economic empowerment of women borrowers, development of entrepreneurship skills as well as conduction of gender sensitization training for PKSF and POs. The POs will also be oriented to develop a medium-term gender strategy and action plan under this project.
- Environmental and Social Safeguard: The MFCE Project will focus on minimizing the environmental and social impacts of the MEs following the Environmental and Social Management System (ESMS) Guideline. An Initial Environmental Examination (IEE) will be conducted for each sub-sector to identify the environmental impacts of the MEs and site-specific Environmental Management Plans (EMP) will be developed to manage and mitigate the environment risks. Impact on involuntary resettlement and indigenous people will also be identified in applicable regions to undertake necessary social safeguard measures under this project.
- Climate and Disaster Risk Management: Under the MFCE Project 38 districts have been identified as climate-vulnerable areas of the country and a disaster risk screening will be conducted in those areas. 10 percent of the loan proceeds will be disbursed to MEs in these climate-vulnerable areas.
- Poverty Reduction: The MFCE Project promotes inclusive finance and hence 40 percent of the loan proceeds will be provided to 45 poverty-stricken districts of the country.