IDB subsidzies small business loans in Bolivia

IDB subsidzies small business loans in Bolivia

Loans Economy & Policy Debt Coronavirus Bolivia Andean United States

The Inter-American Development Bank (IDB) said Thursday that it granted a $130 million loan to fund loans to micro, small and medium-sized enterprises (MSMEs) hit by the COVID-19 pandemic in Bolivia.

The 21.8-year loan could benefit 12,000 MSMEs with more than 30% of the money going to women-owned businesses, the IDB said in a press release. The loan has a 10.8-year grace period and an interest rate based on Libor, it added.

According to the IDB, MSMEs account for 99.5% of businesses in Bolivia, but only 41.5% of microenterprises and 60% of SMEs have a credit line or a bank loan, and they face a finance gap of $1.7 billion, equal to 5% of GDP. The gap is wider if the informal sector is included.

The Bolivian government has formed a BOB2.08 billion ($302 million) fund and created a BOB1.5 billion lending program for SMEs during the COVID-19 pandemic. Through the program, medium-sized enterprises can borrow up to BOB115,000 for six years, while small businesses can get BOB75,000 for seven years and micro-enterprises can get BOB35,000 for 11.5 years.

The International Monetary Fund (IMF) predicts Bolivia's economy will shrink 2.9% this year, hit by COVID-19 and falling oil prices, followed by 2.8% growth in 2021.