The Inter-American Development Bank today approved a $900 million loan to Brazil to provide financial support to microenterprises and small- and medium-sized firms.
The resources, to be administered by the Banco Nacional de Desenvolvimento Econômico e Social (BNDES)*, will be instrumental in providing swift and massive funding to a highly productive sector during a period of tight credit.
The loan will also help deepen Brazil’s financial markets and supplement the country’s efforts to accelerate growth and improve income distribution.
BNDES will on-lend the resources operating through a network of more than 180 intermediary financial institutions in the formal, regulated financial sector.
Individual subloans will support investments and working capital associated with projects to modernize and expand the production and service activities.
Loans to microenterprise, defined in Brazil as firms of not more than 19 employees with annual sales of up to $400,000, will be capped at $200,000. The ceiling on loans to small and medium-sized companies, defined as those with annual sales at between $400,000 and $20 million, will be $7 million.
Microenterprise and small and medium-sized firms constitute the major share of Brazil’s economic activity and are the main source of employment for low-income groups, but access to banking financing remains limited and, mostly, restricted to short-term working capital loans. This program, offering medium and long-term financing for investment projects, will provide resources for growth.
BNDES will contribute $900 million to the program, bringing the total amount of financing available to $1.8 billion.
In previous operations the IDB made 17 direct loans to BNDES for a total of $3.3 billion.
The current IDB loan, from the Single Currency Facility of the bank, will carry a 20-year term with a four-year grace period and a variable annual interest rate, which is now 6.97 percent.