The World Bank approves a US$300 million loan to support SMEs in Ecuador

The World Bank (WB) approved this Wednesday a loan for US$ 300 million to expand a financial support program for small and medium-sized companies (SMEs) in Ecuador, executed since 2021 by the state-owned National Financial Corporation (CFN).

The WB office in Quito indicated that the agency’s executive board in Washington approved the loan that will be used to expand the number of loans, beneficiaries, and impact on small and medium-sized businesses, including those owned by women.

In addition, the project seeks the promotion of micro, small and medium-sized companies (MSMEs) that are resilient (adapt and mitigate) to climate change.

The credit responds to the project to promote access to financing for productive purposes for MSMEs in Ecuador, which has the support of the private financial sector and has been applied since the beginning of the COVID-19 pandemic.

The new line of credit was approved by the WB with a variable interest rate, repayable in 20 years and with a grace period of 3.5 years.

In the two and a half years of implementation, the project has had the participation of more than a dozen banks and credit cooperatives from the private sector in Ecuador, which have delivered 3,738 loans and supported another 801 through partial guarantees, added the fountain.

Likewise, 60% of the loans have been allocated to MSMEs owned or managed by women, and almost half of the loans have gone to productive units that obtained financial support from their respective banking institutions for the first time.

“The approval of this additional credit from the World Bank is another example of the trust and international support that Ecuador receives for the orderly and responsible economic management carried out by the government of President Guillermo Lasso”, said the Minister of Economy and Finance, Pablo Arosemena.

“These resources, which will be administered by the CFN, will strengthen the reactivation of the national microeconomy and the generation of employment”, added the minister.

He noted that this new operation will also measure the destination of credits to MSMEs that direct their activity to climate mitigation or adaptation, such as projects to produce renewable energy, develop a “clean transport” and sustainable waste management, among others.

With this additional financing, “the World Bank continues to support an operation that began in the pandemic and has been very successful, reinforcing the CFN’s operating capacity as a second-tier credit institution, in a context of high demand,” said Pilar. Maisterra, interim director of the entity for Bolivia, Chile, Ecuador and Peru.

“The results are evident. These resources have managed to support both the revitalization of the economy and financial inclusionMaisterra added.

Despite progress in this type of project, the gap in access to financing persists in Ecuador, the WB said.

Although credit to the private sector grew from 30% to 48.8% of gross domestic product (GDP) between 2017 and 2021, it is still below the Latin American average, which is 55%, the source added.

According to the Findex database, only 23% of adults in the country borrowed from a formal financial institution in 2021, a value that is less than the 31% average for Latin America.

Access to credit in Ecuador also presents a large gender gap of 18 percentage points, with only 15% of adult women having access to credit.

Source: EFE