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El Salvador will boost credit for micro and small businesses with IDB support

The financing of $20 million will benefit more than 2,000 micro and small businesses, especially those located in municipalities with high marginalization or owned or led by women

El Salvador will boost the economic activity of micro and small businesses (MSEs) with the support of a $20 million financing approved by the Inter-American Development Bank (IDB) that will provide access to credit under better term conditions.  

The program expects to benefit a total of 2,000 MSEs, of which at least 400 are headed or owned by women and 400 more are located in highly marginalized municipalities. It will be executed by the Banco de Fomento Agropecuario de El Salvador (BFA) and will focus on investment productive projects.  Natural and legal persons considered as venture and MSEs borrowers from all economic sectors except coffee, previously covered by other operations, will be able to access credit resources.

On the one hand, the focus in highly marginalized municipalities takes advantage of the BFA´s distribution network of 32 branches, 8 express tellers, and 5 banking correspondents, reaching unattended areas and exercising a catalytic role of productive credit. On the other, the operation seeks to grant loans to women in rural areas, which represent 51.3 percent of the population and require access to financial services.

The resources may be used to finance investments through direct sub-loans in activities that include, but are not limited to the acquisition of inputs, technology, infrastructure, irrigation, equipment, transportation, storage, bulking, and any other purpose related to improving and increasing the scale of the economic activity in the country.

The program is of importance since MSEs have a tremendous impact on economic activity in El Salvador. According to figures from the Superintendency of Competition, they represent 35 percent of the national GDP, 99.3 percent of all businesses and are responsible for generating 67.6 percent of the country's employment.

The IDB loan has a repayment term of 25 years, a grace period of five and a half years, an interest rate based on LIBOR.

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The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is the 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.