Brazil, through the Emergency Access to Credit Program - the FGI-PEAC, will support small and medium-sized enterprises (SMEs) in the face of the crisis generated by COVID-19 to support employment with a $200 million loan approved by the Inter-American Development Bank (IDB).
The program will boost SMEs’ access to credit by providing guarantees and help them overcome any eventual temporary liquidity problem, ensure the continuity of their operations, and strengthen their financial sustainability.
Small and mid-sized enterprises are crucial for the country’s economy – they account for 40.3 percent of total jobs and for 34 percent of wages, according to Relação Anual de Informações Sociais (Annual Report of Social Information) data. However, they face major hurdles for growth that hinder their development, particularly in terms of access to financing.
In this context, a guarantee mechanism will mitigate the risk associated with SMEs to mobilize the private sector so that financial agents directly contributes to the stabilization and recovery of the productive sector.
The operation’s direct beneficiaries will be approximately 1,250 SMEs affected by the COVID-19 crisis, adopting a multisector approach, offering loans subject to demand and ensuring that the credit lines provide ample coverage to the most vulnerable sectors, including agrifood, machinery and equipment, retail commerce, passenger and freight transportation, tourism, and energy.
This program will provide three key benefits: financial cash flow for SMES; an instrument to help financial agents mitigate the risk associated with the SME segment; and support to the economy as a whole so it can profit from the ability of SMEs to continue operating, using social security benefits to cushion the impact of business closures and job losses, while at the same time creating conditions to enable a faster economic recovery.
The IDB’s $200 million loan is for a 25-year term, with a 5.5-year grace period and an interest rate based on LIBOR.
The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source of long-term financing for economic, social and institutional development in Latin America and the Caribbean. The IDB also conducts cutting-edge research and provides policy advice, technical assistance and training to public and private sector clients throughout the region.
Borges De Padua Goulart Janaina
Communications Sr Specialist