IDB to help Nicaragua restore credit flow to the productive sector

A $20 million credit line will channel funds to the financial system for onlending to micro-, small-, and mid-sized productive enterprises

The Inter-American Development Bank approved a $20 million credit line to help the continuity of the flow of credit to Nicaraguan enterprises that have been affected by the international financial crisis.

The multisector credit program will channel medium- and long-term funds to the Nicaraguan financial system for onlending to the productive sector, in particular micro-, small-, and mid-sized enterprises, which play a crucial role in fueling growth and jointly account for 84 percent of all employment in the country.

This sector has been the hardest hit by the global financial emergency and its ensuing credit crunch, accumulating a funding deficit of about $100 million—$60 million for medium-sized firms and $40 million for smaller ventures.

The borrower for the program will be the Republic of Nicaragua and the executing agency will be Financiera Nicaragüense de Inversiones (FNI), a financial intermediary set up 21 years ago by the government.

The Bank's credit line consists of a $10 million credit from its ordinary capital for a 30-year term, including a 66-month grace period, at a variable interest rate based on Libor; and a $10 million loan from the IDB's concessional Fund for Special Operations, for a 40-year term and a 40-year grace period, at a 0.25% interest rate.