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BB | Dec 20, 2020

IDB announces US$30 million loan to support MSMEs in Barbados

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Inter-American Development Bank headquarters in Washington DC. (Photo: Mario Roberto Durán Ortiz for Wikipedia)

The Inter-American Development Bank (IDB) is providing a US$30 million loan to the government of Barbados to support micro-, small- and medium-sized enterprises (MSMEs) in the country to help maintain jobs.

In a statement on the weekend, the IDB advised that it has approved the loan to support the short-term financial sustainability of the MSMEs in Barbados in order to preserve jobs given the impact of the COVID-19 crisis on the productive sector of the economy.

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

The IDB loan has a repayment period of 25 years, a grace period of 5.5 years and an interest rate based on the London Inter-Bank Offer Rate (LIBOR), which is the benchmark interest rate at which major global banks lends 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 in its statement. Pointing out that that although the health emergency has been contained in the Barbados so far, the IDB underscored that the COVID-19 pandemic has led to a severe social and economic crisis.

Bajan economic contraction since COVID-19

“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 an 11.6 per cent contraction,” the IDB reported. With MSMEs making up about 96.3 per cent of formal businesses in Barbados, the IDB reported that a large majority were micro- and small-sized, accounting for 45.3 per cent and 46.9 per cent respectively.

Photo: Medium.com

Medium-sized firms are categorised as firms having between 26 and 50 workers, account for 4.1 per cent of firms. The IDB has emphasised the importance of MSMEs to the Barbadian economy, explaining that 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.

In explaining about the credit guarantees, the IDB states that, “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 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,” the IDB added

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