The Asian Development Bank (ADB) on Monday signed a loan of 32.5 million US dollars and 2.5 million euros in Shanghai for Business Development Bank Limited (BDB), a wholly foreign-owned bank in China.

The loan is for BDB's expansion of lending to small and medium- sized enterprises (SMEs), according to an ADB news release on Tuesday.

The ADB's loan will serve as a catalyst for BDB to secure additional equity, new debt funding from other lenders, making BDB able to acquire a business license of operating in the Chinese currency yuan, said William Willms, an ADB principal investment officer.

Presently, BDB extends mainly dollar-denominated loans to medium-scale enterprises requiring dollar financing in Shanghai and nearby coastal provinces. It is also permitted to conduct limited yuan business with foreign enterprises in specified major cities.

BDB plans to expand its lending to SMEs, while maintaining a healthy capital adequacy level. It also plans to increase its capital base, and obtain a broader yuan-business license and subsequently tap into more yuan funding to provide local currency loans to local SMEs, according to ADB.

Many Chinese SMEs have difficulty accessing financial services and securing financing. Given the undergoing historic transformation of China's banking and financial sector, ADB is planning to support the promotion of a stronger credit culture and competitiveness in the banking and financial sector, meeting credit demand from SMEs, ADB said.

Source: Xinhua