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IDB approves $30 million for private sector in Nicaragua

The Inter-American Development Bank today approved a $30 million soft loan to Nicaragua to expand the supply of medium- and long-term financing to small- and medium-sized private enterprises. The action coincided with a visit to the Bank by Nicaragua’s President Enrique Bolaños, who delivered a presentation to the Board of Executive Directors on the situation in his country.

The resources from the IDB loan are much needed by the Nicaraguan financial system, which suffers from a shortage of stable and long-term funding. At the same time the government is committed to further deepening of financial sector reform.

The resources will be used by intermediary financial institutions for onlending to eligible startup or existing firms in all sectors of the economy in both urban and rural areas, including manufacturing, commerce and services.

The loans will meet the firms’ need for fixed assets and required working capital for the expansion, conversion or modernization of production, as well as for the hiring of technical and management services to support such investments.

A technical assistance component of the program will strengthen the executing agency, the Financiera Nicaragüense de Inversiones, S.A.,* to help it improve its risk management system, develop new products and access the domestic and international capital markets in the medium term.

The program reflects the shared goals of the IDB and the Nicaraguan government to reactivate economic growth and improve competitiveness of the private sector, strengthening its productive capacity and spurring private sector investment.

The IDB loan from the Fund for Special Operations if for a 40-year term, with a 10-year grace period, at an interest rate of 1 percent during the grace period and 2 percent thereafter. Local counterpart funds total $7.2 million.

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