El Salvador to improve productivity with IDB support
The Inter-American Development Bank (IDB) has approved a $100 million loan to promote access to investment credit for micro, small and mid-sized companies (MSMEs) to strengthen their productivity and competitiveness.
The IDB operation will function as a global credit program that will assist the country in supporting productivity growth and competitiveness of micro, small, and medium sized enterprises (MSMEs) by improving their access to medium and long-tem credit for production-oriented projects. By working through the development bank of El Salvador (BANDESAL) second tier platform, the program will reach most MSMEs through the country’s banking and non-banking financial institutions.
Boosting productivity is key to increasing living standards and reducing poverty in the country. El Salvador’sproductive structure is based on services and consumption. Its productive structure has changed over the last two decades as a result of the structural reforms implemented in the early 1990s. In 1990 the agriculture sector generated 17.0 percent of GDP, but by 2013 its share had fallen to 12.19 percent, while sectors such as commerce, restaurants and hotels increased their GDP shares in the same period from 18.1 percent to 20.1 percent, and financial establishments and insurance from 2.2 percent to 3.6 percent.
“The new, more service based economy needs stronger and more productive smaller firms that can promote the development of the country’s exports and create more jobs. This project is squarely aligned with that objective.” said Maria Netto, IDB Project team leader. Over the next four years the project aims to finance more than 1,000 MSMEs and nearly 500 MSMEs led by women.
The IDB financing consists of $100 million from the ordinary capital, with a 25-year term, a grace period of 5.5-years and an interest rate based on LIBOR. The executing agency is the El Salvador Development Bank (BANDESAL)
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