May 19, 2020

The government announces liquidity measures for micro-, small- and medium-sized enterprises and injects US$150 million into the CORFO MSME loan facility

The government announces liquidity measures for micro-, small- and medium-sized enterprises and injects US$150 million into the CORFO MSME loan facility
These resources will benefit some 180,000 businesses nationwide and will improve the availability of loans through non-banking financial institutions, particularly for micro-enterprises. Meanwhile the “Fondo Crece” (Growth Fund) will focus on small- and medium-sized companies.

The Minister of Economy, Development and Tourism, Lucas Palacios, and the Executive Vice President of Chile’s Development Agency CORFO, Pablo Terrazas, announced the details of the liquidity measures to support micro-, small- and medium-sized enterprises (MSMEs) in Chile. They announced that an additional US$150 million will be injected into the CORFO MSME loan facility, mainly for micro and small businesses. This is additional to the US$28 million already allocated to this program this year. This injection will allow CORFO to provide 215,000 loans benefiting around 180,000 micro and small businesses in Chile.

The Corfo MSME loan facility will widen and improve the financing available for MSMEs through non-banking financial institutions (NBFIs), and is designed for companies, cooperatives, clearing houses and foundations whose business is providing lending, leasing or factoring facilities.

“There is one group of people who are going through an especially difficult time, and they are the owners of micro-businesses. Three out of every four companies in Chile are micro-enterprises. They are the smallest companies, which are often run by their owner, with maybe one or two hired staff. This resource injection will directly support this group of people,” explained Lucas Palacios, Minister of Economy, Development and Tourism. 

Corfo’s Executive Vice-President, Pablo Terrazas, said that "this increase in resources for the CORFO MSME loan facility is fundamental, as it will reach a wide group of MSMEs that are currently served by informal financing entities, such as Fondo Esperanza, Banigualdad or Emprende Microfinanzas, which currently support businesses that do not have bank accounts and cannot get access to all the NBFIs. The Fondo Crece and Fogape (Small Business Guarantee Fund) loans, together with this measure, will enable us to provide most of the SMEs in Chile with sufficient liquidity to get through this crisis."

The main beneficiaries of this facility are Fondo Esperanza and Emprende Microfinanzas, as 94% of their beneficiaries consider their businesses to be vulnerable. Furthermore, 40% work from home, 81% are women, 12% are aged over 60, 36% did not finish high school, 48% are female heads of household, and 68% live outside the Metropolitan Region.

Fondo Crece (Growth Fund)

President Sebastián Piñera recently announced that the government is structuring the growth fund Fondo Crece through Corfo, mainly for small- and medium-sized companies. It expects to raise close to US$1 billion from contributors such as banks, insurance companies, investment funds, and pension funds, and it will be backed by state guarantees.

Accordingly, Corfo will invite General Fund Administrators (AGFs) in the Chilean market to submit proposals over the coming weeks to generate liquidity for NBFIs. Corfo will provide an 80% guarantee for a 72-month term on the loan portfolio pledged by NBFIs to financiers.

The regulations will be submitted to the Comptroller General of the Republic this week, and it is expected that the invitation to tender will be issued during the next few weeks.