$20 million loan to improve energy efficiency in Small and Medium-sized enterprises

El Salvador will expand the availability of financing to Small and Medium Enterprises (SMEs) for investment projects in energy efficiency, with a $20 million loan from the Inter-American Development Bank (IDB).

The loan will benefit the SMEs in all sectors of the economy with limited or no access to the long-term credit needed to invest in energy efficiency. It is estimated that the program, BANDESAL’s first line of credit exclusively dedicated to promoting energy efficiency investments, could support 494 SMEs.

The funds for the loan come from the Green Climate Fund (GCF) and will be executed by Banco de Desarrollo de El Salvador (BANDESAL). The objective is to support efforts in El Salvador to reduce energy consumption by SMEs and bring down greenhouse gas emissions.

Salvadoran SMEs face difficulties in gaining access to more modern technologies and migrating toward more productive business models. This is largely due to their low investment levels, which are in turn a result of their limited access to long-term credit.

El Salvador is promoting energy efficiency and supporting renewable energy as a way of implementing a low-carbon economy, reducing the country’s dependence on oil derivatives and lowering its greenhouse gas emissions.

The loan program will be supplemented by a non-reimbursable US$1.7 million technical cooperation to be used to develop energy savings measurement and financial risk transfer instruments to encourage the structuring of technically sound and financeable investments in energy efficiency.

The IDB financing is for a 20-year term, with a 5.5-year grace period and a 0.75 fixed interest rate.