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IDB approves $100 million facility to support financing for small and medium enterprises

New facility will strengthen SME lending by financial institutions in Latin America and the Caribbean

The Inter-American Development Bank (IDB) created a $100 million facility to support lending to small and medium enterprises (SMEs) in Latin America and the Caribbean.

The first-of-its-kind SME Financing Facility, approved by the Bank’s Board on May 18, will provide targeted resources to financial institutions in IDB borrowing member countries to on-lend to SMEs or to guarantee their SME portfolios. Financing from the IDB’s new facility may be complemented by co-loans, co-guarantees as well as syndicated loans depending on market conditions.

The new facility is part of the IDB’s strategy to improve access to finance for SMEs in Latin America and the Caribbean, boost job creation, enhance productivity and strengthen economic growth.

“The facility provides a new avenue for the IDB to continue channeling resources through financial institutions to further address the unmet demand for financing products and scale up the Bank’s experience in the SME sector by leveraging on the extensive outreach, scalability and sustainable approach of financial institutions in the region,” said Daniela Carrera-Marquis, chief of financial markets division of the IDB’s Structured and Corporate Finance Department.

The facility will form a pivotal component of the financial markets strategy of the IDB’s Structured and Corporate Finance Department. Moreover, it’s at the center of the beyondBanking program, specifically aligned with the program’s accessBanking pillar that targets financial deepening strategies for those traditionally under-served by the financial system.

The unmet credit demand by regional SMEs is estimated at more than $100 billion. Micro, small and medium enterprises account for 98 percent of the estimated 17 million formal companies in the region, employing between 60 percent and 70 percent of the workforce.