Hassle-free lending for MSMEs nears launch

Micro, small and medium-sized enterprise (MSME) business people are one step closer to gaining access to approximately 60 million (US$30 million) in hassle-free loans to help them ride out the difficult period created by the COVID-19 pandemic.

This loan, the Global Credit Programme for Safeguarding the Productive and Employment, is one of two loans approved by the Inter- American Development Bank (IDB) for Barbados in the last quarter of 2020 and is now entering the implementation phase.

The other is the approximately $160 million Contingent Loan for Natural Disaster Emergencies.

“Two Government of Barbados programmes financed by the Inter-American Development Bank (IDB) recently moved into the initial stages of implementation with the signing of contracts for loans approved by the IDB in the last quarter of 2020,” the IDB said in a statement on Monday.

In the case of the MSME loan, the IDB announced that it was signed off on last week by IDB Country Representative Juan Carlos De La Hoz Viñas and Prime Minister Mia Mottley.

“The objective of this programme is to help MSMEs affected by the COVID-19 pandemic overcome temporary liquidity problems, protect jobs and, at the same time, allow business continuity and operations,” said the Washington-based development financing institution.

It pointed out that the executing agency for the Global Credit Programme for Safeguarding the Productive and Employment will be the Central Bank of Barbados, which will administer the loan resources to provide guarantees to intermediary financial institutions for individual loans to eligible MSMEs.

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

Following the start of the COVID-19 pandemic last year March, some MSMEs, which make up over 90 per cent of formal enterprises in Barbados and just over 60 per cent of employment, had to take the drastic measure of either closing their doors or lay off staff as they found it increasingly difficult to cope.

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

In the case of the Contingent Loan for Natural Disaster Emergencies, the IDB said the signing of the contract was completed at the end of February this year by the same signatories.

The Ministry of Finance, Economic Affairs and Investment will be the executing agency for this programme, which is aimed at alleviating the impact that the mentioned natural disasters could have on the country’s public finances.

“This will go towards providing stable, cost-effective, and quick access contingent financing to cover extraordinary public expenditures during emergencies caused by severe or catastrophic natural disasters, specifically those from hurricanes and excess rainfall associated with cyclonic systems,” said the IDB.

It is estimated that more than half of residents in Barbados live in zones of high risks from natural hazards, and that about fourfifths of the island’s gross domestic product is generated in “exposed area”, according to the IDB.
Barbados is known to be affected especially by flooding over the years and storm surges, which put sections of the population, including residents and commercial buildings and other infrastructure at risk.

Insisting that the country, like most small island developing states, was vulnerable to severe natural disasters and climate change, the IDB insisted that the loan will help build financial resilience to disaster and climate risks.
The IDB’s portfolio with Barbados includes investment loans and technical assistance across various sectors including energy, education, social care, tourism, climate resilience, financial markets and public sector modernization.
Both loans carry a 5.5 years grace period and a repayment period of 25 years. (MM)