Development banks and governments must cooperate more closely to strengthen MSMEs

SMEs account for 99% of the companies in Latin America and the Caribbean and generate 67% of employment. In this regard, local governments and development banks should enhance cooperation to strengthen MSMEs and small entrepreneurs in the region, explained the Permanent Secretary of the Latin American and Caribbean Economic System (SELA), Ambassador Clarems Endara, during his participation in the Annual Forum of the Alliance of Subnational Development Banks, held in São Paulo, Brazil.

“It is urgent to strengthen the development of instruments that are more adapted to the reality of the MSME business ecosystem. We need to promote effective productive financing, with simplified requirements and direct credit lines. Development Banks are a key player at a time when MSMEs are representing the labour force of the region. It is not only about the business muscle, but also about investment in social sectors that are the hardest hit at the moment,” the Permanent Secretary said.

He also recalled the recent launch of the second edition of the Public Policy Index for MSMEs in Latin America and the Caribbean (IPPALC), conducted in Uruguay, jointly with the Organisation for Economic Co-operation and Development (OECD), CAF-development bank of Latin America, and the Ministry of Industry, Energy and Mining (MIEM) of Uruguay. “This is a tool to monitor and promote the development of MSMEs in Latin America and the Caribbean. Our intention is to include Central America in a second stage, which will allow us to have a strong regular evaluation of the public policy that is being applied to MSMEs. These robust analyses will enable us to move towards regional production chains and efficient public policies,” Ambassador Clarems Endara added.

Subnational Development Banks (SDBs) are Public Development Banks or Financial Institutions supported by national governments or States. Their mandate is to finance local governments and local actors, such as SMEs, as well as subnational urban investments. The Alliance was launched in April 2021 by the French Development Agency (AFD), the Development Bank of Minas Gerais (BDMG), the Global Fund for Cities Development (FMDV) and the Institute for Sustainable Development and International Relations (IDDRI), within the dynamics of Finance in Common, the World Summit that brings together 500 public development banks.

The Annual Forum of the Alliance of Subnational Development Banks of Latin America and the Caribbean took place on 10 and 11 August at the headquarters of the Federation of Industries of the State of São Paulo (FIESP), where participants discussed the role of SDBs in financing urban climate transition, as well as financing social inclusion and economic development in the region.