The Inter-American Development Bank (IDB) has approved $150 million in financing to launch the first guarantee fund to back loans for micro, small, and medium enterprises (MSMEs) in Panama. 

An estimated 2,200 Panamanian MSMEs—primarily in agriculture, commerce, and services—will be able to access financing with the backing of the new guarantees fund. Of the operation’s total resources, 20% are expected to guarantee loans for climate adaptation and mitigation and 20% will support women-owned or women-led enterprises.

MSMEs are the backbone of Panama’s productive sector. They make up 97% of the country’s businesses, contribute 17% of its GDP, and account for 57% of employment nationwide. However, these businesses continue to have limited access to financing. In December 2020, large businesses secured over 500,000 loans, while medium sized ones secured just 228,000, small enterprises 126,000, and micro enterprises 56,000.

The Guarantee Fund will be created and implemented according to international best practice. Its aim is to encourage financial intermediaries to expand their loan portfolio for MSMEs to boost productivity in Panama.

Additionally, the fund will provide advisory and financial education services to MSMEs on topics like financial statements and technically sound business plans.

The $150 million IDB loan to Panama has a 15-year repayment period, a 5-year grace period, and an interest rate based on the Secured Overnight Financing Rate (SOFR).