Dutch development bank FMO has extended $70 million of syndicated loan to Brac Bank, the largest transaction of its kind for any local bank, to expand its small and medium-sized enterprise financing.
The five-year loan will enable Brac Bank to provide trade finance support to SME entrepreneurs and, along the way, create new employment and spur economic development in urban, suburban and rural areas.
“The funding from this syndicated facility has a high development impact,” Nanno Kleiterp, chief executive officer of the Hague-based lender, said.
“This milestone deal is just the beginning of our partnership with FMO to provide financing support to grassroots entrepreneurs and elevate their economic condition,” said Syed Mahbubur Rahman, CEO of Brac Bank.
The deal will set a precedent for other Bangladeshi banks for taking similar extent of financing from international financiers and opening up financing avenues for SME and corporate clients, he added.
As Brac Bank has an extensive branch network, the arrangement will particularly benefit small and medium entrepreneurs in rural and suburban parts, where the supply of banking services is still limited.
Syndicated loan is a debt facility offered by a group of lenders (called a syndicate) who work together to provide funds for a single borrower.

Typically, there is a lead bank or underwriter of the loan known as the arranger, who puts up a proportionally bigger share of the loan or performs duties like dispersing cash flows among the other syndicate members and administrative task.
In this case, FMO acted as the arranger, providing $13.7 million of the total sum of $70 million.
The syndicate members include: ACTIAM ($3.8 million), OFID ($15 million), OeB ($10 million), BIO ($10 million) and Responsibility ($2.5 million). Proparco has committed to follow in 2015 with the rest $15 million.
Brac Bank was established in 2001 by Brac, a non-governmental organisation, with the aim to service SMEs alongside their traditional focus on microfinance and poverty alleviation.
In just 13 years of operation, it has gone on to become the country's largest SME financier, disbursing SME loans to around 4.15 lakh people and generating direct employment to around 17 lakh.
FMO was founded in 1970 by the Dutch government, commercial banks, the national employers' association, labour unions and private investors to make investments in private sector projects in developing and emerging markets.
With an investment portfolio of 6.6 billion euros, FMO today is one of the largest European bilateral private sector development banks.