Prime Bank to get $35m from IFC

International Finance Corporation is providing a $35 million loan to Prime Bank to help support small and medium enterprises (SMEs) and companies affected by the Covid-19 pandemic.

The World Bank Group member expressed its belief that the loan would help preserve thousands of jobs in Bangladesh by enabling the private commercial bank to provide critical working capital to help small businesses continue their operations.

The SMEs comprise over 90 per cent of businesses in Bangladesh and employ over 20 per cent of the adult population, the IFC said in a statement.

The financing package is part of the IFC's $8 billion global Covid-19 fast-track financing facility, aimed at helping companies stay afloat during the ongoing public health crisis.

This investment comes under the Working Capital Solutions (WCS) programme of the Covid-19 response envelope, which provides $2 billion globally to emerging-market banks, enabling them to support struggling firms.

The International Development Association's Private Sector Window (IDA PSW) Blended Finance Facility is also supporting the IFC's WCS programme with a first-loss guarantee of up to $215 million in eligible countries, including Bangladesh.

The first loss guarantee is a mechanism whereby a third party compensates lenders if the borrower defaults. As the third party pays for the losses, it gives lenders confidence to give out loans.

"This new investment from IFC will allow us to extend critical working capital, trade finance and forex liquidity to affected businesses," said Rahel Ahmed, managing director and CEO of Prime Bank.

"This fresh fund injection will enable us to lend a helping hand, particularly to export and import-based SMEs and other corporate clients, and thousands of suppliers and employees who depend on these businesses."

Prime Bank, a private-sector commercial bank in Bangladesh, has been an IFC client since 2014.

"This is an unprecedented crisis that the world is facing and we need all hands on deck to navigate the public health crisis and the resulting economic challenges," said Rosy Khanna, IFC regional industry director for Financial Institutions Group for Asia and Pacific.

"Small and medium enterprises are key not just in terms of overall contribution to GDP but also in terms of job creation and the impact of the pandemic on them has to be addressed."

The IFC states to be the largest global development institution focused on the private sector in emerging markets, working in more than 100 countries.

In fiscal year 2020, the IFC invested $22 billion in private companies and financial institutions in developing countries, saying that it was leveraging the power of the private sector to end extreme poverty and boost shared prosperity.

The World Bank Group created the $2.5 billion IDA Private Sector Window to catalyse private sector investment in the poorest and most fragile countries.

The window is said to recognise a key role the private sector would play in achieving IDA18 objectives and the Sustainable Development Goals.

It is said to provide concessional funds for co-investment alongside the IFC and Multilateral Investment Guarantee Agency private investments.

The statement says concessional funds help to mitigate risk and reduce barriers, which unlocks and crowds in private investment in emerging markets.