The Inter-American Development Bank has approved a $10 million credit guarantee to help up to 80,000 small entrepreneurs get access to loans under an innovative program provided by Chile’s Banco de Crédito e Inversiones (BCI).<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
BCI will apply new management and credit technologies for the program. It will partner with some of its own corporate clients who have large distribution networks and micro entrepreneurial client bases. It will also provide training to extend financial services to businesses operated by owners with low incomes who typically are excluded from the country’s financial system.
BCI Nova Banca Emergente, a separate unit, will carry out the program.
The program will focus primarily on the Chilean capital, Santiago, where one quarter of Chile’s microenterprises are located, and provide 40 percent of the metropolitan area’s employment. Around one million people in Santiago remain unbanked. More than 60% of Chile´s microentrepreneurs are estimated to lack access to bank credit.
The IDB’s credit guarantee, with resources from the Bank’s Opportunities for the Majority initiative, will be denominated in Chilean pesos. A $600,000 grant from the IDB’s Multilateral Investment Fund will support the training component of the program and the formation of strategic alliances with corporate and other partners.
“BCI, with IDB support, will contribute to extend financial democracy to an underserved market through the full use of modern technologies and the development of new business tools, applied in conjunction with strategic partners,” said Luiz Ros, manager of the Opportunities for the Majority initiative. “This will have a real impact on the lives of thousands of small businesses.”
BCI will work with corporate suppliers to obtain credit histories and background information needed to decide loan applications by small business owners.
The project includes several other innovative tools, such as electronic payments, online collection, specialized training for bank personnel and mobile classrooms to extend financial literacy to borrowers.