DHAKA: The Asian Development Bank (ADB) for the first time has approved a large fund of US $250 million to support microfinance initiative in its member countries.

The ADB at a meeting at its Manila headquarters today approved the fund, which will be disbursed under the Microfinance Risk Participation Programme of the Bank, said a press release.

The programme will allow ADB to partner with financial institutions that actively lend to microfinance institutions (MFIs) in ADB’s developing member countries and to share the default risk on underlying MFI loans.

The programme will also support the expansion of lending to MFIs, in turn enabling increased provision of financial services to the underserved.

This will help address the significant unmet demand from the poor for financial services, and provide additional funding for micro-borrowers.

Under the terms of the programme, ADB will typically assume up to 50 per cent of the default risk on loans made to MFIs, in aggregate up to a maximum of $250 million.

According to ADB, the microfinance industry has boomed in recent years with Asian institutions estimated to have over 47 million borrowers as of the end of 2008, with outstanding loans of over $10 billion. —BSS