The World Bank (WB) announced on Wednesday that its executive directors have approved a loan of 100 million U.S. dollars to support China's efforts to finance micro and small enterprises (MSEs).

The project would expand credit flows to MSEs on a mass-market and commercially sustainable basis, said a WB statement.

The project consisted of wholesale and retail operations. The China Development Bank (CDB), one of China's policy banks, had been chosen as the wholesaler for the project and would lend to and arrange technical support for participating financial institutions at the retail level.

Under the project, 95 million U.S. dollars will be channeled by the CDB to financial institutions, with a maturity of up to ten years and grace period up to five years. The financial institutions will lend the funds to MSEs at commercial interest rates.

The other five million U.S. dollars would fund specialized and comprehensive technical assistance to the CDB and financial institutions, to strengthen their institutional capacity and skills to effectively engage in MSE lending.

MSEs played an essential part in China's effort to build a harmonious society, said David Dollar, WB country director for China.

The WB hoped the project would demonstrate to Chinese banks that lending to MSEs could be commercially sustainable so that MSEs, mainly in the private sector, could expand, creating jobs and income growth and reducing poverty, said David Dollar.

According to the WB, Germany's KfW Banking Group had provided parallel financing under the project with a loan of 50 million U.S. dollars and a grant from the German government of three million Euros.