IDB Approves $190M in Loans to Boost Technology, Innovation, and Green Energy in Salvadoran MSMEs

The first loan of $130 million is allocated to the Program to Support the Technological and Digital Transformation of MSMEs.

The Inter-American Development Bank (IDB) has approved two transformative loans totaling $190 million to support the technological, digital, and energy transitions of micro, small, and medium-sized enterprises (MSMEs) in El Salvador. These initiatives are designed to enhance the competitiveness and sustainability of the country’s economic backbone while promoting inclusivity and resilience.

The first loan of $130 million is allocated to the Program to Support the Technological and Digital Transformation of MSMEs. This initiative aims to provide approximately 700 Salvadoran businesses with access to credit to adopt advanced digital technologies and increase their global market competitiveness.

The program focuses on enabling MSMEs to modernize their operations, streamline processes, and utilize cutting-edge solutions that foster productivity. The financing will be channeled through the Banco de Desarrollo de El Salvador (BANDESAL) and distributed via local commercial banks.

Energy Efficiency and Renewable Energy Financing

The second loan, worth $60 million, is designated for the Financing Program for Energy Efficiency and Renewable Energies in Salvadoran MSMEs. This program will provide medium- and long-term financing to approximately 450 businesses, enabling them to adopt energy-efficient technologies and renewable energy solutions.

In addition to financing, the program includes technical assistance to establish baselines for energy savings and reductions in greenhouse gas emissions, helping MSMEs transition toward greener, more sustainable operations.

MSMEs: The Backbone of El Salvador’s Economy

With around 500,000 MSMEs generating 66% of jobs and contributing 43% of El Salvador’s GDP, the sector is vital to the nation’s economic health. Despite their importance, MSMEs often face challenges such as limited financing options, outdated technology, and vulnerabilities to climate change impacts.

“These two new programs underscore the IDB’s commitment to fostering sustainable and inclusive development in El Salvador. They aim to strengthen MSMEs by facilitating their transition to competitive, efficient, and resilient business models while ensuring that the productive sector becomes more equitable and environmentally sustainable,” said Olga Gómez, IDB Country Representative for El Salvador.

Focus on Gender Inclusivity

Both projects prioritize identifying and supporting women-led or women-owned enterprises, which often encounter greater difficulties in accessing financial resources, particularly for technological upgrades and innovation. These measures aim to bridge gender gaps and promote inclusivity within the Salvadoran business ecosystem.

Loan Terms and Broader Impacts

Both loans feature favorable terms, including a 23.5-year repayment period, a seven-year grace period, and an interest rate tied to the Secured Overnight Financing Rate (SOFR).

In addition to improving productivity, the programs are expected to contribute significantly to climate resilience and sustainability in El Salvador. By integrating renewable energy and fostering digital transformation, the initiatives align with global sustainable development goals, paving the way for a greener and more inclusive economy.

These programs further consolidate El Salvador’s position as a regional leader in adopting innovative strategies to empower MSMEs and drive long-term economic growth.