The Second Small and Microfinance Development Project Loan will provide a credit line to three commercial banks – Ipak Yuli Bank (IYB), Hamkorbank, and Agrobank. The banks were chosen for their financial soundness, significant rural and/or urban retail network, proven track record in microfinance intermediation, prudent exchange risk management, and transparent corporate, financial, and management practices.

The loan will help the banks meet a growing demand for credit from micro and small enterprises (MSEs). Hamkorbank and Agrobank will have allocations of US$20 million each, while IYB will have an allocation of US$10 million. The participating banks will match ADB’s loan funding with equal co-funding from their own resources.

The commercial banks will lend funds to MSEs at market-based rates and give them the option to draw down loan funds in cash. These features avoid subsidized direct credits or a premium to cash over noncash funds.

The MSEs can use the money for production and trade in goods and services, and for investment and working capital purposes.

The technical assistance will help banks with credit appraisal and microfinance accounting and reporting standards, as well with lending to women and microcredit organizations. It will also coach end-borrowers, especially women, in business plan preparation and credit applications.

Under the loan agreement, at least 25% of the new microfinance accounts opened will be for women, and at least 1,000 women borrowers will be trained.

"The project will generate 30,000 additional jobs which will increase economic growth, improve living standards, and reduce poverty," said Radhakrishna Narasimham, principal financial management specialist of ADB’s Central and West Asia Department.