WASHINGTON, July 1, 2020 ¨C ľ¹ÏÓ°Ôº Board of Directors today approved a US$260 million loan for Ecuador¡¯s National Finance Corporation B.P. (CFN) to promote access to financing for microenterprises and small and medium enterprises (SMEs) for productive activities. This project will support the country¡¯s economic reactivation and recovery from the Covid-19 (coronavirus) pandemic.
The CFN is the oldest public financial institution in Ecuador and offers services to promote the development of the country¡¯s productive sector. This project aims to: (i) strengthen the institutional capacity of the CFN and the country¡¯s financial institutions; (ii) develop and/or improve financial products to promote access to financing for microenterprises and SMEs; (iii) enhance the complementarity of public banking and private financial institutions through the expansion of second-tier operations nationwide; and (iv) promote access to financing for microenterprises and SMEs for productive activities.
Additionally, a project sub-component will support the implementation of a special emergency guarantee program to mitigate the economic impact of the pandemic crisis, which particularly affects microenterprises and SMEs. The project will benefit thousands of small business owners by guaranteeing their liquidity and providing the working and investment capital they need to maintain productive activity and create employment.
"The national government created the Reactivate Ecuador Program to mitigate the pandemic¡¯s impact on microenterprises and SMEs. ľ¹ÏÓ°Ôº is supporting us in this firm decision to reactivate the economy and protect Ecuadorians¡¯ jobs, prioritizing female entrepreneurs and sectors requiring urgent attention,¡± said Richard Mart¨ªnez, Ecuador¡¯s Ministry of Economy and Finance.
Ecuador has some 900,000 businesses, 90 percent of which are microenterprises, 7 percent small enterprises and 2 percent medium enterprises. In other words, 99 percent of Ecuador¡¯s businesses are microenterprises and SMEs, which create 60 percent of all jobs. In the current context, this segment represents a key pillar of the economy and employment in the country, and it is facing many challenges for maintaining its productive activity, jobs and income.
¡°International experience demonstrates that the SME sector is the most vulnerable to fluctuations in the economic cycle and more susceptible to credit restrictions or rationing,¡± said Marianne Fay, World Bank director for Bolivia, Chile, Ecuador and Peru. ¡°With this loan, we hope to support the reactivation of this important economic segment and thus to contribute to enabling small business owners to have increased liquidity to sustain their businesses and for their workers to keep their jobs,¡± she said.
Ecuador is a world leader in female-led enterprises. However, access to financing is more limited for these enterprises than for similar enterprises led by men. To address this gender gap identified in the financial sector, the project will promote a gender equality approach.
Additionally, the loan funds will enable a larger number of indigenous, Afro-Ecuadorian and Montubio individuals and communities to access loans for their microenterprises and SMEs through CFN.
The credit is a fixed-margin loan with a maturity period of 24 years and a five-year grace period.
World Bank Group response to Covid-19 (coronavirus):
World Bank Group COVID-19 Response
The World Bank Group, one of the largest sources of funding and knowledge for developing countries, is taking broad, fast action to help developing countries strengthen their pandemic response. We are supporting public health interventions, working to ensure the flow of critical supplies and equipment, and helping the private sector continue to operate and sustain jobs. We will be deploying up to $160 billion in financial support over 15 months to help more than 100 countries protect the poor and vulnerable, support businesses, and bolster economic recovery. This includes $50 billion of new IDA resources through grants and highly concessional loans.
Learn more about the work of the World Bank in Latin America and the Caribbean: www.worldbank.org/lac
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