British government-backed Funding for Lending Scheme (FLS), posted improvement in the second quarter of this year, the Bank of England (BoE) said Monday.

Figures released by the BoE, the central bank, on Monday showed that the net lending in the second quarter under the scheme increased by 1.6 billion pounds (2.49 billion U.S. dollars), better than the previous quarter.

The scheme, launched in August last year, aims to make lending cheaper for businesses and promote economic growth.

The FLS creates incentives for banks and building societies to boost their lending to British real economy by reducing their funding costs, which in turn allows them to reduce the price of new loans.

"Market funding costs have fallen significantly since the announcement of the FLS and this has reduced the incentive to draw on FLS funding for some participants," BoE said.

The central bank said there are now a total of 41 banks and building societies participating in the scheme,

According to the BoE statistics, banks have drawn down 17.6 billion pounds of cheap funds from the FLS, set up to stimulate lending to households and businesses in Britain since it started.

However, "net lending overall since the Scheme began remains broadly flat," the central bank said.

In the first quarter, banks took more cheap funds from the scheme than they lent to customers, shrinking net lending by 300 million pounds.

It said net lending to individuals had picked up slightly in the second quarter but lending to businesses shrank.

Paul Fisher, Executive Director for Markets at the BoE, said: "The FLS is continuing to support lending to the British economy with a range of indicators suggesting that credit conditions are steadily improving for households and firms, and FLS participants collectively expect net lending volumes to pick up over the remainder of this year."

The biggest net lenders between March and June this year were Nationwide, Lloyds, Barclays and Virgin Money, the BoE said.