This operation seeks to expand loans to businesses led by women and micro, small and medium enterprises (MSMEs), which represent 96% of the companies registered in El Salvador.
MSMEs are the second largest source of employment and contribute 10% of the country's Gross Domestic Product (GDP), and are the second largest source of employment, yet less than half have a bank loan or line of credit. Official data from the World Bank reveal that only 10% of women-owned businesses have a loan from a financial institution.
IFC provided FEDECRÉDITO with $60 million in long-term financing, backed by diversified repayment rights (DPR), which will extend loans to salvadoran MSMEs, and particularly women-led businesses.
"This type of financing is not readily available in El Salvador, but with the COVID-19 pandemic it is important to provide the financial market with innovative tools to mobilize funds for the private sector, and especially for small businesses", said Sanaa Abouzaid, IFC Manager for Central America.
IFC's funding to FEDECRÉDITO incorporates a combined loan mechanism from the Women's Entrepreneurial Financing Initiative (We-Fi), which provides incentives for the provision of credit to SMEs led by women. In addition, with its Women's Banking program, IFC will advise and share international best practices to help FEDECRÉDITO enhance its value proposition for this market.
As the first DPR transaction with a gender focus worldwide, which will allocate funds for productive enterprises led by women, El Salvador will become a showcase for the rest of the countries in Central America that also rely heavily on remittances.
"At FEDECRÉDITO we recognize the important role that micro, small and medium enterprises play in the country's economy, as well as low-income people in these difficult times. That is why in our role we are proud to partner again with IFC to continue working on offering innovative options to expand access to financing for these segments and promote economic recovery in our beloved El Salvador", said Macario Armando Rosales Rosa, President and CEO of FEDECRÉDITO.
IFC's operation in Central America has a strong focus on strengthening the financial systems of the region's countries, primarily to reduce the financial gap of underserved sectors, particularly by expanding financing for MSMEs, women entrepreneurs, and access to affordable housing for low- and middle-income families.