Brazil To Utilize $3 Billion Credit Line To Boost Lending To Small Businesses

The funds will help companies expand, update, and diversify their activities, while fostering competitiveness and job creation

Brazil will spur competitiveness and job creation in micro, small, and medium-sized enterprises (MSMEs) by channeling financing to the sector with help from a $3 billion conditional credit line from the Inter-American Development Bank.

The conditional credit line for investment projects (CCLIP) and a first loan of $1 billion from the facility were approved today by the board of the IDB. The Bank’s assistance –the second of its kind for the country– will include matching funds from Brazil’s National Economic and Social Development Bank (BNDES) totaling $3 billion in order to ensure a steady flow of medium- and long-term funds to finance investment projects of micro and small companies.

BNDES will use the IDB loan and its own resources to finance a program aimed at boosting credit for micro and small companies. The funds will provide liquidity to financial institutions to extend credit for these companies to expand, update, and diversify their production.

Microenterprises, microentrepreneurs, and individuals can receive up to $200,000 of financing from the program while small and medium-size businesses can get as much as $850,000 and $3 million, respectively.

Micro, small and medium size enterprises are vital for Brazil’s economy, generating two out of every three jobs. However, its access to medium – and long-term market credit, which has traditionally been limited due to structural problems, has been further squeezed by the global financial crisis.

In light of this, the government has stepped in to close the credit gap, with BNDES approving 86,000 operations with micro and small companies in 2007 and 122,000 in 2008, disbursing 12.1 billion reais and 17.6 billion reais, respectively. The IDB’s multicredit program follows on the steps of a similar conditional credit line approved in 2004 in order to provide continued support to this strategy.

The Bank’s $1 billion loan, first in a series of three under the second conditional credit line, is for a 20-year term, including a four-year grace period, at a LIBOR-based interest rate.

Topics: Brazil, business, CCLIP, credit line, Economy, funding, IDB, individuals, Inter-American Development Bank, loans, Microenterprises, microentrepreneurs, MSMEs, small business

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