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The Asian Development Bank (ADB) has signed a loan of up to US$20mn to finance the expansion of Bangladesh’s major mobile cellular phone network, GrameenPhone.

ADB in 1998 helped finance the initial build-out of GrameenPhone, participating with a package of US$1.5mn equity and US$16.67mn debt.

Key to the project is continued access to a 1,800km optical fibre transmission system leased out to GrameenPhone by Bangladesh Railway. This state-of-the-art technology forms a national network linking cities and rural areas into a single system that allows scope for additional services, such as data communications.

The project will also facilitate expansion of the village pay telephone service, operated by Grameen Telecom, which leases telephones to village entrepreneurs who sell telephone services to fellow villagers. Operators are selected from women villagers, most of whom can be considered poor.

Through this arrangement, the Grameen Bank organisation makes available its network of branches and microcredit facilities to finance and operate the village phone service.

“The new loan will help continue the expansion of Bangladesh’s telecoms sector, which still has a large unmet demand,” says Stephen Wermert, an ADB senior structured finance specialist.

“Expansion will bring the country broad economic benefits such as greater market efficiency and improved distribution channels in agriculture, merchandising, manufacturing, and financial services. Better communications improves people’s lives in other ways, by strengthening social and cultural ties, boosting access to health and education services, and providing speedier response to emergencies.”

IFC will provide a loan of US$30mn, and a loan of US$10mn will come from the Norwegian Investment Fund for Developing Countries (Norfund).

ADB’s US$20mn loan is issued without government guarantee from ADB’s ordinary capital resources, with a term of five years, including a grace period of one year.