IFC, a member of the World Bank Group, is boosting its response to the COVID-19 (Coronavirus) pandemic by offering new incentives for financial institutions to provide loans to SMEs in the poorest countries and to women entrepreneurs across all emerging markets.
Under the new initiative, up to $215 million in blended finance support will be available to encourage working-capital loans in low-income countries eligible for support under the International Development Association’s (IDA) Private Sector Window (PSW). Support from the IDA PSW will be in the form of pooled first-loss guarantees to support approximately $860 million in new working capital loans to SMEs in critical need of additional short-term liquidity to continue operating during the pandemic.
In addition, as part of IFC’s Banking on Women business, up to $2.4 million will be provided as performance-based incentives to financial institutions that agree to earmark at least 20 percent of working-capital loan proceeds for lending to women customers and women-led enterprises. These funds will be provided by the Global SME Finance Facility, the Women Entrepreneurs Opportunity Facility (WEOF)—a partnership between IFC and Goldman Sachs 10,000 Women—and the Women Entrepreneurs Finance Initiative (We-Fi).
“The COVID-19 crisis is having a severe impact in the world’s poorest countries, which have limited fiscal resources and capacity to cope with the pandemic’s economic devastation,” said Martin Spicer, director of Blended Finance at IFC. “Blended concessional finance through the IDA PSW can help IFC expand its reach in these difficult markets while the performance-based incentives will help bring more capital to women-owned enterprises, who have been disproportionately impacted by the crisis.”
Countries eligible for IDA PSW support are largely concentrated in sub-Saharan Africa, where the outbreak has resulted in the expectation of the first recession in the region in 25 years. Small businesses provide the bulk of the continent’s jobs and are being hit particularly hard during the crisis.
“We’re seeing an unprecedented demand for working-capital loans in low-income countries – where commercial lending was already severely constrained. With the de-risking provided by blended finance resources, IFC will be able to better address the liquidity needs of the companies and small businesses that are so critical to these economies,” said Paulo de Bolle, Senior Director of IFC’s Financial Institutions Group. “This initiative provides new ammunition in the effort to help small businesses and women entrepreneurs confront the COVID-19 pandemic.”
As part of the agreement, BOA Kenya has the opportunity to earn performance-based incentives from the Global SME Finance Facility and the Woman . IFC is providing a syndicated loan, as part of the Women Entrepreneurs Facility, of $50 million to ACLEDA Bank to boost lending to small and medium enterprises.