The Inter-American Development Bank today approved a $1 billion loan as part of a $3 billion credit line for Banco Nacional de Desenvolvimento Economico e Social (BNDES). The program aims to support expansion, integration and access to financing of the Brazilian micro, small and medium-sized enterprises sector.
The program, guaranteed by the government of Brazil, will provide medium and long-term financing for investment projects to make firms more competitive.
“Micro, small and medium-sized enterprises represent 95 per cent of all firms and provide 64 per cent of the jobs in the country,” said IDB team leader Felipe Gómez-Acebo. “The sector´s strength, productivity, growth and profitability are essential factors for both the economy and employment in Brazil. These type of programs serve to increase the competitiveness of the sector and create more labor opportunities.”
The BNDES channels a large portion of indirect loan (onlending) operations to enterprises. Microenterprises — those that have 19 or fewer employees and annual gross sales of $400,000 or less — and the formal small and medium-sized enterprise sector — composed of firms having between 20 and 499 employees and gross annual sales of under $20 million — are key for the entire economy because of their role in the industrial modernization and the reengineering of production processes.
The IDB has supported four very successful multisector credit programs with the BNDES since 1995 for a total of $3.5 billion. The BNDES, the only significant source of medium- and long-term funding for financial intermediaries, has a strategic role in Brazil in increasing the volume of credit in the economy.
The new loan follows IDB strategy agreed with Brazilian authorities in the context of the country´s 2004-2007 Economic Plan to achieve sustained, socially inclusive growth.
The 20-year IDB loan has a four-year grace period and a variable interest rate. Local counterpart funds will total $1 billion.