MSMEs in El Salvador to Access Business Loans with IDB Support

The Inter-American Development Bank (IDB) has approved a $100 million loan to help micro, small, and medium-sized enterprises (MSMEs) in El Salvador thrive by expanding their access to medium- and long-term business loans. 

Specifically, the IDB funds will finance lines of credit from the Banco de Desarrollo de la República de El Salvador (BANDESAL) that are designed for intermediary financial institutions, which in turn can offer loans to the enterprises themselves.  

The loan is the third individual operation under the Conditional Credit Line for Investment Projects (CCLIP) for increasing access to business and housing loans in El Salvador. This $400 million CCLIP was approved in July 2020 to promote business activity and social welfare in the Central American country.

The loan is expected to improve beneficiary MSMEs’ sales revenue and allow them to create more jobs. It should also positively affect Salvadoran women entrepreneurs, given that 30% of the funds will target MSMEs led or owned by women.

According to data from the Salvadoran Banking Association, 99% of the country’s microenterprises—particularly those involved in commerce—regularly take out informal loans considered usurious. Likewise, the 2019 National Survey on Access to Finance for MSMEs revealed that only 29% of MSMEs in the country have successfully secured formal lines of credit or loans.

This third loan operation for $100 million will have a 25-year repayment schedule, a 5.5-year grace period, and a SOFR-based interest rate.   

About the IDB

The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a 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 projects and provides policy advice, technical assistance, and training to public- and private-sector clients throughout the region.