IDB provides funding for MSME sector

Micro, small and medium-sized enterprises (MSMEs) in Barbados are to get a $60 million (US$30 million) boost to help maintain jobs, the Inter-American Development Bank (IDB) announced on Friday.

The bank said it had approved the loan to support the short-term financial sustainability of the MSMEs in order to preserve jobs given the impact of the COVID-19 crisis on the productive sector of the economy.

The purpose of the loan, the Washington-based development financing institution said, is to help the affected MSMEs to overcome temporary liquidity problems, protect jobs “and at the same time, allow business continuity and operations”.

Noting that although the health emergency had been contained here so far, the bank said the COVID-19 pandemic has led to a severe social and economic crisis.

The IDB said: “Due to the COVID-19 pandemic, the economy contracted 14.9 per cent in the first semester of 2020 and the expected outlook for 2020 is a 11.6 per cent contraction.”

With MSMEs making up about 96.3 per cent of formal businesses here, the IDB said a large majority were micro and small-size, accounting for 45.3 per cent and 46.9 per cent respectively.

The medium-sized firms, having between 26 and 50 workers, account for 4.1 per cent of firms.

Stressing the importance of MSMEs to the economy, the IDB said these businesses contributed about 64.1 per cent of the national added value and accounts for approximately 60.7 per cent of Barbadian jobs.

The US$30 million IDB loan will go towards a programme to support credit guarantees for individual investment loans to be undertaken by eligible MSMEs.

“Guarantees may support working capital loans for expenses, including supplies or merchandise, payroll and utilities, among others. The idea is to ensure the recovery, improvement and maintenance of economic activity in the short-term,” the bank said.

“The resources under this intervention will be directed both to MSMEs affected by the COVID-19 crisis and to their overarching strategic chains, giving priority to sectors identified in the vulnerability assessment,” it explained.

The $60 million IDB loan has a repayment period of 25 years, a grace period of 5.5 years and an interest rate based on LIBOR, the benchmark interest rate at which major global banks lend short-term loans to one another on the global interbank market.

Details about how the loans will be distributed are expected to be made public in coming days, the IDB said.
(MM/PR)