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IDB $126M loan to boost capacity of over 100 small businesses

Jul 20, 2022 News

Kaieteur News – Approximately 120 small businesses will soon benefit from a series of capacity building exercises following the approval of a loan from the Inter-American Development Bank (IDB) totalling $126M.

The funding will specifically address the stagnation of microenterprises (MEs) in Guyana due to challenges in accessing financing for growth, which in turn constrains MEs’ contribution to wealth and job creation, as well as economic development in the country.

The financial institution outlined that these challenges in accessing finance include firm owners’ gaps in business knowledge and limited use of technology, which generate inefficiencies, drive up operating costs and constrains profits available for re-investment; as well as the lack of access to affordable growth capital, which puts pressure on firm profits and growth.

The solution proposed by the Economic Development Fund Inc (EDF) in partnership with the IDB will address business and financial knowledge gaps of MEs in its nine-month Economic Development Accelerator (EDA), currently funded for a limited number of participants by the USAID Eastern and Southern Caribbean Mission.

It was explained that EDF is a Guyana-based business accelerator that, since 2019, has provided training, technical support, and coaching from international experts, as well as capital to support the scaling of targeted startups and MEs in Guyana. EDF is also a Guyana-registered private corporation and an awardee of a USAID grant. It is also sponsored by GTT, the country’s largest telecommunications provider.

Kaieteur News understands that EDA clients will participate in practical business management and business leadership development training that includes technical support and coaching from international experts. The EDA also provides capacity building for MEs involved in agro-processing and, ideally, with additional support, the skilled trades, and programmes for other small manufacturers.

Furthermore, EDF’s EDA programme is expected to offer a differentiated financing option: a mixed instrument that is not traditional debt, but a recoverable grant in the form of a “note” that provides a legal framework for recovery of the funds. It was explained that the innovation behind the proposed funding component is that MEs’ revenue streams provide the basis for repayment of the grant awarded.

Through revenue-based grant repayments, the EDA grant will meet the working capital needs required to catalyze growth of Guyana’s MEs.

Additionally, the beneficiaries EDF’s solution is intended for growing MEs in industries that possess strong, predictable monthly revenue. The programme, inclusive of the recoverable grant, would serve an initial 120 MEs across all 10 regions of Guyana. It is anticipated that, demographically, programme awardees will be approximately 50% male and 50% female. It is expected that awardees will be from most of Guyana’s more populated regions.

The IDB noted that its contribution USD $200,000 will be structured as a Non-Reimbursable Technical Corporation instrument to support training, coaching of MEs as well as development of the ecosystem to support MEs’ growth in Guyana. An additional USD$600,000 will be structured as a Contingency Recovery Investment Grant (CRIG) instrument that will be used to finance the growth of an initial 120 MEs.

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