Bangladesh: Small and Medium-Sized Enterprise Development Project

Sovereign Project | 36200-013 Status: Closed


The Small and Medium-Sized Enterprise Development Project is aimed at accelerating the development of small and medium-sized enterprises (SMEs), especially SMEs in rural and nonurban areas, by improving their access to medium- and long-term credit.

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Project Name Small and Medium-Sized Enterprise Development Project
Project Number 36200-013
Country Bangladesh
Project Status Closed
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 2549-BAN: Small and Medium-Sized Enterprise Development Project
Asian Development Fund US$ 76.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change Private sector development
Sector / Subsector

Finance - Small and medium enterprise finance and leasing

Gender Equity and Mainstreaming
Description The Small and Medium-Sized Enterprise Development Project is aimed at accelerating the development of small and medium-sized enterprises (SMEs), especially SMEs in rural and nonurban areas, by improving their access to medium- and long-term credit.
Project Rationale and Linkage to Country/Regional Strategy

The major development challenge in Bangladesh is a sharp east-west regional divide in terms of employment and economic growth. The contrast in the incidence of poverty between the eastern and western parts of the country is significant-with a headcount ratio of 32%-34% in the eastern part (comprising Dhaka, Chittagong, and Sylhet divisions) versus 47%-52% in the western part (comprising Barisal, Khulna, and Rajshahi divisions). This disparity has emerged as a key public policy concern. Unemployment and underemployment in the western part are also much higher than in the eastern part. The Government's policy priority is to foster economic development in nonmetropolitan and/or rural and nonurban areas (i.e., outside the metropolitan areas of Dhaka and Chittagong) to address regional inequalities.

The Government's development agenda for nonmetropolitan and/or rural and nonurban areas recognizes the private sector as the engine for growth and employment. Nonmetropolitan SMEs comprise 60%-65% of the country's 1.5 million SMEs and account for most of the private sector in rural and nonurban areas. Nonmetropolitan SMEs are a key driver to reduce poverty in the country since these SMEs are responsible for generating rural nonfarm activities-the source of more than 50% of employment and income for the rural population.

An investment climate assessment conducted by the World Bank in October 2008 indicates that access to credit (particularly medium- to long-term credit) remains a key constraint for SMEs. Lack of credit access is more marked in nonmetropolitan areas. As a result, nonmetropolitan SMEs are unable to realize their full potential to grow and generate employment.There are indications that the global financial crisis is beginning to impact the economy. The recession in developed markets and the economic slowdown in the Middle East are beginning to threaten Bangladeshi exports and remittances which can have a significant impact on unemployment in the economy. In the context of the projected economic slowdown from the global financial crisis, the Government has sought Asian Development Bank (ADB) support for a key stimulus measure-enhanced access to finance to enable SMEs to operate at full potential.

Impact Contributing to continuing economic growth and poverty reduction through development and growth of the SME sector
Project Outcome
Description of Outcome Enhanced growth in the number and size of commercially viable SMEs (with emphasis on women owned SMEs) and increased employment in the SME sector
Progress Toward Outcome Establishment of SMEs 1,521,084 SMEs (308,726 in 2010; 319,341 in 2011, and 359,110 in 2012, and 533,907 in 2013), and employment generation in SMEs (1,639 in 2011; and 4,201 in 2012, and 1,186 in 2013) are in increasing trend. Women entrepreneurs are gradually comming up in establishing SMEs. Country wide, under different program, a total of 1,521,084 enterprises developed during 2010-13 meaning increase by 183% comparing to 2009 baseline. A total of 11,804 enterprises funded under the Project which is 1.4% comparing to baseline of 2009. Total 7,026 employments created during 2010-2013 by the SMEs assisted by the Project. The Project was extended up to 31 December 2013. Under the Project, approximately 10% - 11% represent women enterprises of total SME established. Implelmentation of the Project has been physically completed and the accounts will be closed by 31 March 2014.
Implementation Progress
Description of Project Outputs

1. Expansion of medium- to long-term credit by PFIs to SMEs located outside the metropolitan areas of Dhaka and Chittagong, with emphasis on women-led SMEs

2. Enhanced capacity of women entrepreneurs and associations to fully access the financial resources earmarked for women-led SMEs under the Project

Status of Implementation Progress (Outputs, Activities, and Issues)

Ongoing. According to BB, SME credit ratio was 21.07 in 2010 which is 23.82 on 30 July 2012. This means that the growth has been overachieved by now.

Ongoing. Involvement of women in SME sector is gradually increasing that reached to around 10% by now.

Ongoing. Bangladesh Women Chamber of Commerce and Industries (BWCCI) has been appointed as consultant to train women in SME establishment, training in necessary business, project feasibility, and access to financial institutions. This increased establishment of women enterprises in SME sector. As a result, 100% applications by women entrepreneurs became successful. The successful application is more than 10% nationwide.

Geographical Location Bangladesh
Safeguard Categories
Environment FI
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects No subproject (SMEs) will be financed that may have a significant adverse environmental impact.
Involuntary Resettlement No involuntary resettlement impact is envisaged from the Project.
Indigenous Peoples The Project will not have any impact on indigenous peoples and ethnic minority in Bangladesh.
Stakeholder Communication, Participation, and Consultation
During Project Design The Project was prepared in consultation with a broad range of stakeholders, including Bangladesh Bank, the Board of Investment, the National Board of Revenue, Ministry of Commerce, Ministry of Finance, Ministry of Industry, the Bangladesh Small and Cottage Industries Corporation (BSCIC), the SME Foundation, city corporations and municipalities, various private sector agencies (including chambers of commerce and business associations), and development partners. In addition, indepth consultations were carried out with the Bangladesh Women Chamber of Commerce and Industry (BWCCI), the Women Entrepreneurs Association, and Micro Enterprise Development Assistance and Services (MIDAS).
During Project Implementation
Business Opportunities
Consulting Services A contract with Bangladeh Women's Chamber of Commerce and Industries (BWCCI) has been signed in September 2010 for implementing the activities under the Technical Assistance subproject in accordance with ADB's Guidelines on the use of Consultants (2007, as ammended from time to time).
Procurement Procurement under ADB-financed subloans will be in accordance with ADB's Procurement Guidelines (2007, as amended from time to time), as these relate to financial intermediary loans. Eligible subborrowers will be required to undertake procurement in accordance with established private sector or commercial practices that are acceptable to ADB.
Responsible ADB Officer Bidyut Kumar Saha
Responsible ADB Department South Asia Department
Responsible ADB Division Bangladesh Resident Mission
Executing Agencies
Finance Division, MOF (EA)
Mr. Amalendu Mukherjee
Ministry of Finance, Dhaka-1000, Bangladesh
Concept Clearance 28 Apr 2009
Fact Finding 03 May 2009 to 13 May 2009
MRM 16 Jul 2009
Approval 17 Sep 2009
Last Review Mission -
PDS Creation Date 16 Oct 2009
Last PDS Update 31 Mar 2014

Loan 2549-BAN

Approval Signing Date Effectivity Date Closing
Original Revised Actual
17 Sep 2009 12 Oct 2009 03 May 2010 30 Mar 2013 31 Dec 2013 22 Jul 2014
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 126.67 Cumulative Contract Awards
ADB 76.00 17 Sep 2009 0.00 0.00 0%
Counterpart 50.67 Cumulative Disbursements
Cofinancing 0.00 17 Sep 2009 74.97 0.00 100%
Status of Covenants
Category Sector Safeguards Social Financial Economic Others
Rating - - - - - Satisfactory

Safeguard Documents

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None currently available.

Evaluation Documents

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