Ecuador to Increase Financing to MSMEs with $300 Million IDB Loan

The Inter-American Development Bank (IDB) has approved a $300 million loan to support the post-pandemic economic recovery of Ecuador's micro, small and medium-sized enterprises (MSMEs) by expanding their access to credit.

MSMEs represent 98% of the country's companies, which were strongly affected by the COVID-19 pandemic. The funds will boost the National Public Banking Finance Corporation (CFN, after its Spanish initials) and its CRECER (Credit for Business Growth and Recovery) Program. The CRECER Program will boost the financing mechanisms managed by the CFN: the National Guarantee Fund, and second-tier banks, which work with commercial banks to boost Ecuadoran MSMEs’ access to credit.

This economic sector is responsible for 60% of employment in Ecuador, but faces serious problems due to insufficient financing for its development. With this IDB funding, the CRECER Program will support more than 33,000 MSMEs from all sectors of the economy throughout the country, by providing guarantees and credit, particularly to MSMEs led by women and focused on environmentally sustainable projects.

Within the CFN's second-tier bank, the amount allocated to MSME projects for climate change mitigation and adaptation is expected to increase from $7 million to $37 million, and the amount allocated to credit for women's MSMEs from $32 million to $122 million.

The contribution of the CRECER Program to the National Guarantee Fund is expected to generate a loan portfolio for MSMEs of around $1.61 billion. At the same time, the resources channeled by the CRECER Program through the CFN's second-tier banks could generate a portfolio of $279 million in favor of the country's MSMEs.

The $300 million loan, from the IDB's ordinary capital, is for a 25-year term, with a 5.5-year grace period and an interest rate based on SOFR.