The Inter-American Development Bank (IDB) has approved a $300 million conditional credit line for Peru to support investment in  business innovation and help close the technology gap that holds micro, small and medium-sized enterprises (MSMEs) back.

The first operation under the credit line, with $100 million from the IDB, will finance business-innovation projects  selected through a competitive process and will offer financial guarantees to facilitate scaling-up of MSME-led innovation projects. It will also provide support to collaborative business-innovation projects aimed at tackling sectoral challenges that hamper the development of subnational value chains. This, in turn, will help generate technological solutions to public challenges in areas such as healthcare, clean production, and climate-change mitigation.

The operation will help close the technology gap that MSMEs face developing a variety of services markets for digitalization and compliance assessment for businesses seeking to enter global value chains. It will also support the institutional strengthening of the Peruvian government to help it design and implement innovation policies.

Additionally, the operation will strengthen incubation and acceleration services for new ventures and help expand the Network of Innovative Women Entrepreneurs by financing women-focused training, marketing and mentoring projects.

The project is expected to promote an increase in innovation investment and labor productivity within the beneficiary businesses. The IDB’s Vision 2025 strategy for accelerating recovery from COVID-19 and generating sustainable, inclusive growth identifies investment in small businesses and digitalization as core objectives.

The IDB credit line financing is for a 14.5-year term, with a 6.5-year period of grace, and an interest rate based on LIBOR. The government of Peru will provide an additional $40 million in local counterpart funding.