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Financing Small Business In Latin America

Two Honduran women graft coffee plants, a skill they learned through a program supported by Pathways to Prosperity.

Growing small and medium-sized businesses is without a doubt the key to powering the engine of economic growth in Latin America.

Growing small and medium-sized businesses is without a doubt the key to powering the engine of economic growth in Latin America. The U.S.Department of State and the U.S. Agency for International Development recently announced partnerships with three private banks in Latin America. These financial institutions will make available $98.5 million in local lending for small and medium-sized enterprises.

Financing Small Business In Latin America
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U.S. Assistant Secretary of State for Western Hemisphere Affairs, Roberta Jacobson, said, "these partnerships reflect the United States' commitment to job creation, entrepreneurship, and the economic success of citizens of these nations."

There are approximately 34 million businesses in Latin America and the Caribbean; however many cannot grow to their potential due to insufficient access to capital. These new agreements will open $60 million in local financing in Mexico, $25 million in El Salvador, and $13.5 million in Nicaragua. Around 4,000 small and medium-sized enterprises, or SMEs, will access credit through these guaranteed loans, which will help entrepreneurs grow their businesses and create local jobs.

In El Salvador, where SMEs account for half of all economic activity in a nation of 6 million people, a new USAID partnership with Banco Davivienda will open $25 million for SMEs. Banco Davivienda will lend to SMEs on a longer-term basis and reduce collateral requirements for approved borrowers.

In Nicaragua, a new USAID credit guarantee with Banpro, a Nicaraguan commercial bank, will open $13.5 million in lending for SMEs, particularly for those along the underserved Caribbean coast.

In Mexico, non-bank financial institutions are a primary source of financing for SMEs. A new partnership between USAID, Credit Suisse, and Velifin, a Mexican non-bank financial institution, will unlock $60 million in private capital for SMEs.

These credit guarantees are supported with Department of State funding under the Pathways to Prosperity in the Americas initiative, a policy-level dialogue that links 15 Western Hemisphere governments and societies that collectively seek to empower small businesses, facilitate trade and regional competitiveness, build a modern and inclusive workforce, and encourage green, sustainable business practices; and USAID’s Development Credit Authority, which works with investors, local financial institutions, and development organizations to design and deliver investment alternatives that unlock financing for entrepreneurs in the developing world.

The success of small and medium enterprise is an important priority in the hemisphere for the United States. In addition to Pathways to Prosperity, the United States supports entrepreneurs through the Small Business Network of the Americas, the Women’s Entrepreneurship of the Americas Initiative, or WEAmericas, and USAID’s on-going development programs.