The program, which will be carried out by Brazil's Banco Nacional de Desenvolvimento Econômico e Social, comes at a time when the Brazilian government has had to tighten its fiscal policy in the face of global financial turmoil.

"Support for these small enterprises is critical for improving their productivity and for creating a large number of employment opportunities," IDB President Enrique V. Iglesias said at a Bank executive board meeting when the loan was approved.

One of the main goals of the Brazilian program is to expand small firms' access to medium- and long-term financing so that they may improve their operations and become more competitive. Brazil's smallest companies and businesses employ between 24 and 36 million people.

The lack of access to credit is one of the greatest hurdles small firms must overcome. Only about 10 percent of them obtain loans from cooperatives, finance companies and nongovernmental organizations. Due to their informal nature and regulatory constraints on banks, most microenterprises must turn to friends, relatives, suppliers or moneylenders for credit, usually on unfavorable--if not usurious--terms.

The availability of financing also should serve as an incentive for microenterprises and small businesses that operate in the informal or "underground" economy to join the mainstream, building on Brazil's 1997 simples program that simplified tax rules for small-scale enterprises.

Another component of the program will encourage private sector investment in projects that improve the quality of higher education and health services for the poor, two areas that also have suffered from the lack of access to long-term financing.

While university enrollment has risen exponentially in Brazil over the past four decades, from under 100,000 students in 1960 to over 1.6 million in 1994, the percentage of young Brazilians getting a higher education is about half the average for the region. Nevertheless, demand far outstrips the system's capacity to accommodate students.

In the case of health services, a constitutional mandate requires the Brazilian government to provide free coverage for the uninsured, which make up about 70 percent of the population.

Budgetary constraints and unintended consequences of the policies governing the state-run universities and health system, such as subsidies that benefit the middle class, have been especially costly for the poor.

On the other hand, until now private providers of higher education and health services rarely had access to the long-term financing needed to significantly expand their operations.

By tapping such credit lines, efficiently run higher education institutions and health care providers will be able to play a larger role and serve more people. Private universities tend to offer more affordable programs and more flexible schedules to accommodate less affluent students. The expansion of private sector health services would allow the government to concentrate on providing care for low-income groups.

-- Peter Bate