USA / COLOMBIA – The Inter-American Development Bank (IDB) approved a $200 million loan to support productive financing and sustainable development for micro, small, and medium-sized enterprises (MSMEs) in Colombia.
The program, approved by the bank’s board of executive directors, aims to expand MSMEs’ access to financing for productive investments focused on business innovation and digitalization, and to make production more environmentally sustainable. The financing will be channelled through Bancóldex, Colombia’s business development bank.
Colombia has 1.6 million registered companies, around 99 percent of which are MSMEs. These companies generate 40 percent of the country’s gross domestic product and employ four out of five workers in the country. However, as of 2021, these companies faced a funding gap of $49.5 billion, which is 2.42 times the current supply of credit in the Colombian financial system.
In response to this long-term funding gap, which is due to market failures in the Colombian financial system, the Colombian government has made productive business transformation a top priority.
The program, which will benefit over 13,000 businesses, includes three components: improving microenterprises’ access to productive credit, providing long-term loans for upgrading production and for digitalization, and offering new lines of credit for investments in environmentally sustainable production.
The program focuses on closing the financing gap for female entrepreneurs, as 50 percent of its first-time loan recipients will be microenterprises led or owned by women. The program will also support the design and implementation of groundbreaking pilot programs to finance enterprises of diverse groups, including Afro-descendants, Indigenous, and LGBTQ+ populations.
The investments in more environmentally sustainable production are expected to cut 12,450 tons of CO2 emissions.
The $200 million IDB loan to Colombia has a 25-year repayment period, a 5.5-year grace period, and an interest rate based on the Secured Overnight Financing Rate (SOFR). This is the third operation of a $600 million conditional credit line for investment projects for productive business financing approved by the IDB in 2019.